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CMS recently acknowledged that “Part D sponsors may be incentivized in certain circumstances to disadvantage selected drugs [chosen for negotiation] by placing selected drugs on less favorable tiers compared to non-selected drugs, or by applying utilization management that is not based on medical appropriateness to steer Part D beneficiaries away from selected drugs in favor of non-selected drugs.”
Simply put, there is a chance that the private plans administering Part D benefits may move drugs that are selected for negotiation into a higher cost-sharing tier, even though Medicare itself will receive the lower negotiated price. There are a few reasons for this. First, patient cost-sharing requirements are often based on the nominal “list price” of medicines. As a result, a drug with a low “maximum fair price” under the new program—which will, by definition, be lower than the old “list price” —could be less lucrative for insurers in terms of patient contributions than the same drug was before it was selected for Medicare price negotiations. Placing selected drugs on higher cost-sharing tiers can help plans recoup lost revenue, even if it leads to higher out-of-pocket costs for patients. Placing selected drugs on higher cost-sharing tiers could also steer individuals toward non-selected alternative drugs that are more profitable for insurers but can be more costly for patients.
Second, health plans and the pharmacy benefit managers they own often retain a portion of the sizable rebates and discounts they negotiate with manufacturers. Since these rebates and discounts are typically calculated as a percentage of a medicine’s list price, health plans often have an incentive to push patients toward high-cost—and thus high-rebate—drugs over lower-price alternatives. From the perspective of certain health plans, a $1,000-per-month drug with a 20 percent rebate is generally preferable to a $100-per-month drug with the same rebate. Yet, for patients, whose cost-sharing requirements are based on the list price of drugs, the $100-per-month medicine would likely be preferable.
In addition to moving selected drugs to a higher cost-sharing tier, plans may restrict access to them through other means. For example, some insurers could require that physicians obtain prior authorization before agreeing to cover a given medication that has been subject to price negotiation. Health plans could also require patients to demonstrate that a less-preferred medication doesn’t work before agreeing to pay for the preferred drug. This approach is known as “step therapy” or “fail first.” An additional concern worth watching is the possibility that some patients could be subjected to “non-medical switching” (that is, plans may switch stable patients off of their current medication and onto an insurer-preferred drug) following formulary manipulation in the aftermath of drug price negotiation. A 2019 literature review demonstrated that non-medical switching was commonly associated with a negative impact on medication-taking behavior, frequently worsening clinical and economic outcomes.
Finally, it’s also likely that the drug negotiation program will lead some insurers to decline to cover certain treatments altogether. There are a few ways this could occur. The first has to do with the fact that Part D plan sponsors are generally obligated to cover just two medicines per therapeutic class. With mandatory coverage of the program’s selected medications, many insurers may decide to cover only one other alternative treatment. As a consequence, patients currently taking other drugs in the same class could be forced to switch to one of the two covered options.
Second, if one drug in a diverse therapeutic class is given a maximum fair price that is much lower than the cost of alternative treatments, some health plans may adjust coverage policies to steer patients toward the cheaper price-controlled drug. It’s critical to note that this won’t be the case for every selected drug. Other factors, such as existing rebates and discounts, will help determine whether health plans push patients toward or away from price-controlled medications.
As any clinician will tell you, various “equivalent” treatments often have vastly different safety profiles and yield markedly varied outcomes in different patients. Clinicians and their patients may be forced into suboptimal choices due to insurers’ financial considerations and narrow formularies. Such financially motivated actions have the potential to undermine the spirit of the IRA’s drug provisions, which was to enhance access to commonly used medications.
https://www.healthaffairs.org/conte...lfill-ira-s-promise-lower-drug-costs-patients
Simply put, there is a chance that the private plans administering Part D benefits may move drugs that are selected for negotiation into a higher cost-sharing tier, even though Medicare itself will receive the lower negotiated price. There are a few reasons for this. First, patient cost-sharing requirements are often based on the nominal “list price” of medicines. As a result, a drug with a low “maximum fair price” under the new program—which will, by definition, be lower than the old “list price” —could be less lucrative for insurers in terms of patient contributions than the same drug was before it was selected for Medicare price negotiations. Placing selected drugs on higher cost-sharing tiers can help plans recoup lost revenue, even if it leads to higher out-of-pocket costs for patients. Placing selected drugs on higher cost-sharing tiers could also steer individuals toward non-selected alternative drugs that are more profitable for insurers but can be more costly for patients.
Second, health plans and the pharmacy benefit managers they own often retain a portion of the sizable rebates and discounts they negotiate with manufacturers. Since these rebates and discounts are typically calculated as a percentage of a medicine’s list price, health plans often have an incentive to push patients toward high-cost—and thus high-rebate—drugs over lower-price alternatives. From the perspective of certain health plans, a $1,000-per-month drug with a 20 percent rebate is generally preferable to a $100-per-month drug with the same rebate. Yet, for patients, whose cost-sharing requirements are based on the list price of drugs, the $100-per-month medicine would likely be preferable.
In addition to moving selected drugs to a higher cost-sharing tier, plans may restrict access to them through other means. For example, some insurers could require that physicians obtain prior authorization before agreeing to cover a given medication that has been subject to price negotiation. Health plans could also require patients to demonstrate that a less-preferred medication doesn’t work before agreeing to pay for the preferred drug. This approach is known as “step therapy” or “fail first.” An additional concern worth watching is the possibility that some patients could be subjected to “non-medical switching” (that is, plans may switch stable patients off of their current medication and onto an insurer-preferred drug) following formulary manipulation in the aftermath of drug price negotiation. A 2019 literature review demonstrated that non-medical switching was commonly associated with a negative impact on medication-taking behavior, frequently worsening clinical and economic outcomes.
Finally, it’s also likely that the drug negotiation program will lead some insurers to decline to cover certain treatments altogether. There are a few ways this could occur. The first has to do with the fact that Part D plan sponsors are generally obligated to cover just two medicines per therapeutic class. With mandatory coverage of the program’s selected medications, many insurers may decide to cover only one other alternative treatment. As a consequence, patients currently taking other drugs in the same class could be forced to switch to one of the two covered options.
Second, if one drug in a diverse therapeutic class is given a maximum fair price that is much lower than the cost of alternative treatments, some health plans may adjust coverage policies to steer patients toward the cheaper price-controlled drug. It’s critical to note that this won’t be the case for every selected drug. Other factors, such as existing rebates and discounts, will help determine whether health plans push patients toward or away from price-controlled medications.
As any clinician will tell you, various “equivalent” treatments often have vastly different safety profiles and yield markedly varied outcomes in different patients. Clinicians and their patients may be forced into suboptimal choices due to insurers’ financial considerations and narrow formularies. Such financially motivated actions have the potential to undermine the spirit of the IRA’s drug provisions, which was to enhance access to commonly used medications.
https://www.healthaffairs.org/conte...lfill-ira-s-promise-lower-drug-costs-patients
