Medicare: A Move by the Government to Tackle Drug Costs

In 2018, we saw CMS respond to the Trump administration’s American Patients First blueprint by implementing measures that aim to improve Medicare beneficiary affordability or improve a plan sponsor’s ability to negotiate steeper discounts. Examples of these changes included the accelerated closing of the donut hole and increasing manufacturer contribution in the coverage gap (Bipartisan Budget Act), allowance of plan sponsors to prefer drugs by indication, and use of step therapy programs for Part B drugs. Moving into 2019, we can expect a continued focus on affordability and pricing. Other areas of opportunity on this front that were raised in the blueprint include: point-of-sale rebate sharing, out-of-pocket limits for beneficiaries in the catastrophic phase, and drug manufacturer–sponsored patient assistance programs (ie, drug coupons). Another CMS area of focus is likely to be on plan sponsor incentives to prefer lower-priced drugs. Evidence of this signal can be seen by CMS’s recent announcement of a new model to lower drug prices in Medicare Part D with updates to their existing Medicare Advantage model. In short, this a voluntary program where Part D plan sponsors are tasked with lowering spend in the catastrophic phase compared with a calculated target. As CMS has become more vocal in communicating that its spend in the catastrophic phase has increased on average 17% from 2008 to 2017, further changes that incentivize lower-priced drugs are predicted.


ICER: Solidifying Influence on Payers Even Further

While drug pricing and rebates continue to carry significant weight in formulary decision-making, in a managed care world that continues to shift toward outcomes- and value-based reimbursement, the use of value frameworks to provide directional guidance is growing. Among the most popular value frameworks are the Institute for Clinical and Economic Review (ICER) assessments. Having initially carved its name on early reports of PCSK9 inhibitors and Novartis’s Entresto, ICER has expanded, creating multiple drug reports in more than 45 disease categories. Payers have historically used these reports to supplement their clinical assessments of drugs; now, these reports are also helping guide contract discussions and benefit designs. For example, a recent survey reported that over 75% of payer respondents would use an ICER value assessment as a component of rebate negotiations. On the benefit design front, however, CVS made headlines when it announced a new program allowing self-funded clients to exclude a drug from formulary if the price exceeded the $100,000 QALY (quality-adjusted life-year) threshold determined by ICER. Continued legislative focus on value- and outcomes-based strategies can be predicted to help maintain, if not propel, ICER’s influence in the coming year.