Modernizing Part D and Medicare Advantage To Lower Drug Prices and Reduce Out-of-Pocket Expenses

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4180-P]

RIN 0938-AT92

Modernizing Part D and Medicare Advantage To Lower Drug Prices and Reduce Out-of-Pocket Expenses

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would amend the Medicare Advantage (MA) program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations to support health and drug plans' negotiation for lower drug prices and reduce out-of-pocket costs for Part C and D enrollees.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 25, 2019.

ADDRESSES:

In commenting, please refer to file code CMS-4180-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov

. Follow the “Submit a comment” instructions.

2.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4180-P, P.O. Box 8013, Baltimore, MD 21244-8013. Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4180-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Christian Bauer, (410) 786-6043, Part D Issues. Marty Abeln, (410) 786-1032, Jelani Murrain, (410) 786-2274, or Brandy Alston, (410) 786-1218, Part C Issues.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:

http://www.regulations.gov

. Follow the search instructions on that website to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

I. Executive Summary and Background

A. Purpose

The primary purposes of this proposed rule are to: Make revisions to the Medicare Advantage (MA) program (Part C) and Prescription Drug Benefit Program (Part D) regulations to support health and drug plans' negotiation for lower drug prices; and reduce out-of-pocket costs for enrollees. This regulation would improve the regulatory framework to facilitate development of Part C and Part D products that better meet the individual beneficiary's healthcare needs and reduce out-of-pocket spending for beneficiaries at the pharmacy and other sites of care.

B. Summary of the Major Provisions

1. Providing Plan Flexibility To Manage Protected Classes (§ 423.120(b)(2)(vi))

Current Part D policy requires sponsors to include on their formularies all drugs in six categories or classes: (1) Antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics; except in limited circumstances. This regulatory provision proposes three exceptions to this protected class policy that would allow Part D sponsors to: (1) Implement broader use of prior authorization (PA) and step therapy (ST) for protected class drugs, including to determine use for protected class indications; (2) exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and (3) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.

The first proposed exception would allow Part D sponsors to use PA and ST for protected class drugs, including to determine use for protected class indications, without distinguishing between new starts and existing therapies, as is currently allowed for all other drug categories and classes. We would also allow indication-based formulary design and utilization management for protected class drugs. This would be consistent with our July 25, 2018 Health Plan Management System (HPMS) memorandum titled, “Indication-Based Utilization Management.” It would also be consistent with our August 29, 2018 HPMS memorandum titled, “Indication-Based Formulary Design Beginning in Contract Year (CY) 2020,” and we are proposing to codify this policy for protected class drugs. This would also allow Part D sponsors to exclude the protected class drug from the formulary for non-protected class indications. As is required for all other drug categories and classes, these formulary design and utilization management edits would be subject to CMS review and approval as part of our annual formulary review and approval process, which includes reviews of prior authorization and step therapy edits that would restrict access, step therapy criteria, prior authorization outliers, and prior authorization criteria. (For an extensive description of our annual formulary checks see the January 2014 proposed rule (79 FR 1939).)

The second proposed exception would permit Part D plans to exclude from the formulary protected class drugs that are a new formulation of a protected class Part D drug, even if the older formulation is removed from the market. That is, Part D plans would be permitted to exclude from their formularies a protected class drug that is a new formulation that does not provide a unique route of administration, regardless of whether the older formulation remains on the market.

The third proposed exception is to permit Part D sponsors to exclude from the formulary any protected class drug whose price increases, relative to the price in a baseline month and year, beyond the rate of inflation. The rate of inflation would be calculated based on

the Consumer Price Index for all Urban Consumers (CPI-U).

2. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)

This rule proposes to require that Part D plan sponsors implement an electronic real-time benefit tool (RTBT) capable of integrating with prescribers' e-Prescribing (eRx) and electronic medical record (EMR) systems under section 1860D-4(e)(2)(D) of the Act. We believe that requiring Part D plan sponsors' implementation of electronic access to real-time benefits (RTB) information would be appropriate given the timing requirements at section 1860D-4(e)(2)(D) of the Act, and would improve the cost-effectiveness of the Part D benefit. RTBTs have the ability to make beneficiary-specific drug coverage and cost information visible to prescribers who want to consider that information at the point-of-prescribing. Because we believe that there currently are no industry-wide electronic standards for RTBTs, we are proposing that each Part D plan implement at least one RTBT of its choosing that is capable of integrating with prescribers' e-Rx and EMR systems to provide prescribers who service its beneficiaries complete, accurate, timely and clinically appropriate patient-specific real-time formulary and benefit (F&B) information (including cost, formulary alternatives and utilization management requirements) by January 1, 2020.

3. Medicare Advantage and Step Therapy for Part B Drugs (§§ 422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, and 422.619)

This rule proposes requirements under which MA plans may apply step therapy as a utilization management tool for Part B drugs. In this proposed rule, we reaffirm MA plans' existing authority to implement appropriate utilization management and prior authorization programs for managing Part B drugs to reduce costs for both beneficiaries and the Medicare program. The use of utilization management tools, such as step therapy, for Part B drugs would enhance the ability of MA plans to negotiate Part B drug costs and ensure that taxpayers and MA enrollees face lower per unit costs or pay less overall for Part B drugs while maintaining medically necessary access to Medicare-covered services and drugs. Additionally, and in order to make sure enrollees maintain access to all medically necessary Part B covered drugs, we propose to modify Part C adjudication time periods for organization determinations and appeals involving Part B drugs.

4. Pharmacy Price Concessions to Drug Prices at the Point of Sale (§ 423.100)

The “negotiated prices” of drugs, as the term is currently defined in § 423.100, must include all pharmacy payment adjustments except those contingent amounts that cannot “reasonably be determined” at the point-of-sale. As a result of this exception, negotiated prices typically do not reflect any performance-based pharmacy price concessions that lower the price a sponsor ultimately pays for a drug, based on the rationale that these amounts are contingent upon performance measured over a period that extends beyond the point of sale and thus cannot reasonably be determined at the point of sale.

In this proposed rule, we are considering for a future year, which could be as soon as 2020, eliminating this exception for contingent pharmacy price concessions. We are considering deleting the existing definition of “negotiated prices” at § 423.100 and adopting a new definition for the term “negotiated price” at § 423.100, which would mean the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor's intermediary (that is, the amount the pharmacy would receive net of the maximum negative adjustment that could result from any contingent pharmacy payment arrangement and before any additional contingent payment amounts, such as incentive fees). To implement the change we are considering to the definition of negotiated price at the point of sale, Part D sponsors and their PBMs would load revised drug pricing tables reflecting the lowest possible reimbursement into their claims processing systems that interface with contracted pharmacies.

We are also considering adding a definition of “price concession” at § 423.100. While “price concession” is a term important to the adjudication of the Part D program, it has not yet been defined in the Part D statute, Part D regulations, or sub-regulatory guidance. We are considering defining price concession in a broad manner to include all forms of discounts and direct or indirect subsidies or rebates that serve to reduce the costs incurred under Part D plans by Part D sponsors.

C. Summary of Costs and Benefits

Provision

Description

Impact

Providing Plan Flexibility to Manage Protected Classes (§ 423.120(b)(2)(vi))

We propose to allow the following exceptions related to protected class drugs: (1) Allow broader use of prior authorization and step therapy for protected class drugs, including to determine use for protected class indications; (2) allow plans to exclude a protected class drug from the formulary if the drug is a new formulation that does not provide a unique route of administration; and (3) allow plans to exclude a protected class drug from the formulary if the drug had a price increase beyond a certain threshold

The estimated savings to the Trust Fund are $141-$180.5 million in 2020-2024, increasing to $195-$240 million in 2025-2029. The governments saves $1.85 billion. Enrollees save $692 million in cost sharing.

E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)

We propose to require each Part D plan Sponsors' implementation of one or more RTBT of its choosing that are capable of integrating with providers' e-Rx and EMR systems and delivering complete, accurate, timely and clinically appropriate patient-specific real-time F&B information beginning on or before 01/01/2020

The scoring of this provision is complex. While there is potential for savings to the Trust Fund arising from substitution of lower cost-sharing tier drugs, we have no way of quantifying this. Also, we are uncertain at this point of the cost to industry to implement this provision. The implementation would most likely involve plans building their own software or use of 3rd party vendors. Both these options are very expensive and might outweigh the savings.

Part D Explanation of Benefits (§ 423.128)

We propose to require the inclusion of negotiated drug pricing information and lower cost alternatives in the Part D Explanation of Benefits. The intent of the proposal is to provide enrollees with greater transparency, thereby encouraging lower costs

There is an estimated cost of $0.2 million in the first year of implementation.

Medicare Advantage and Step Therapy for Part B Drugs (§§ 422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, and 422.619)

We propose certain new requirements for when MA plans may apply step therapy as a utilization management tool for Part B drugs

The estimated savings to enrollees due to reduced out-of-pocket costs are between $5 and $7 million for 2020-2024 and are between $7 and $10 million for 2025-2029. The savings to the Trust Fund are between $145 and $185 million for 2020-2024 and between $195 and $240 million for 2025-2029. There is a modest cost to the government and its contractors of $1 to $1.3 million in 2020-2029 due to a projected increased in appeals. These estimates reflect use of step therapy for which CMS announced authority for MA organizations beginning 2019; that is, estimates reflect impact on the Medicare Trust Fund if plans start using step therapy in 2020.

Pharmacy Price Concessions in the Negotiated Price (§ 423.100)

We are considering for a future plan year, which may be as early as 2020, to redefine negotiated price as the baseline, or lowest possible, payment to a pharmacy

If this policy were adopted for 2020 or a future year, there would be an impact on beneficiaries, the government, and manufacturers. Beneficiaries would save $7.1 to $9.2 billion over 10 years (2020 to 2029), resulting from reduced cost-sharing, offset by slightly higher premiums. However, the provision would be estimated to cost the government $13.6 to $16.6 billion over that span. Manufacturers would also save, about $4.9 to $5.8 billion from 2020 to 2029. Part D sponsors would incur a first year cost of $0.1 million in additional administrative activities related to submission of PDE data.

D. Background

The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) created a new “Part C” in the Medicare statute (sections 1851 through 1859 of the Social Security Act (the Act)) which established what is now known as the Medicare Advantage (MA) program. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), enacted on December 8, 2003, added a new “Part D” to the Medicare statute (sections 1860D-1 through 42 of the Act) entitled the Medicare Prescription Drug Benefit Program (PDP), and made significant changes to the existing Part C program, which it renamed the Medicare Advantage (MA) Program. The MMA directed that important aspects of the Part D program be similar to, and coordinated with, law for the MA program. Generally, the provisions enacted in the MMA took effect January 1, 2006. The final rules implementing the MMA for the MA and Part D prescription drug programs appeared in the January 28, 2005

Federal Register

(70 FR 4588 through 4741 and 70 FR 4194 through 4585, respectively).

Since the inception of both Parts C and D, we have periodically revised our regulations to improve the CMS customer experience through our knowledge obtained through experience with both programs. For instance, in the April 2018 final rule (83 FR 16440), we revised certain delivery and disclosure requirements to be consistent with changing technologies and beneficiary access to on-line information and to revise the marketing and communication standards applicable to MA organizations and Part D Sponsors to focus our mandatory review of marketing materials more effectively.

Through our experience implementing the Part C and D programs and through the research conducted in developing the HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (May 16, 2018, 83 FR 22692), we have identified several proposed regulatory changes that would lower the cost of medications and reduce out-of-pocket costs for enrollees in the Part D program. These changes would also streamline different aspects of the Part D program and reduce associated burden on the government and sponsoring organizations of MA plans and Part D plans.

II. Provisions of the Proposed Regulations

A. Providing Plan Flexibility To Manage Protected Classes (§ 423.120(b)(2)(vi))

Section 1860D-4(b)(3)(G) of the Act requires Part D sponsors to include in their formularies all Part D drugs in classes and categories of clinical concern identified by the Secretary using criteria established through rulemaking. The statute specifies that until such time as the Secretary establishes the criteria to identify drug categories or classes of clinical concern through rulemaking, the following categories or classes shall be identified as categories or classes of clinical concern: Anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants for the treatment of transplant rejection. This policy is frequently called the “protected class” policy in the Part D program, with the drug categories and classes of clinical concern being the “protected classes.” Section 1860D-4(b)(3)(G) of the Act permits the Secretary to establish exceptions that permit a Part D sponsor to exclude from its formulary (or to otherwise limit access to such a drug, including through prior authorization or utilization management) a particular Part D drug that is otherwise required to be included in the formulary. The Secretary must engage in rulemaking to establish these exceptions. Section 423.120(b)(2)(vi) currently provides three regulatory exceptions to the protected class policy that permit Part D sponsors to exclude from their formulary therapeutically equivalent drugs, apply utilization management edits for safety, and exclude other drugs that CMS specifies through a medical and scientific process which also permits public notice and comment.

We are not proposing to change or remove any of the protected classes identified in section 1860D-4(b)(3)(G)(iv) of the Act. Instead, we are proposing to use the authority under section 1860D-4(b)(3)(G) of the Act to establish additional exceptions to the requirement that all drugs in a protected class be included in the formulary and to permit additional use of prior authorization and utilization management. We propose to revise §  423.120(b)(2)(vi) to permit Part D sponsors to implement prior authorization and step therapy requirements for protected class drugs for broader purposes than allowed currently. We also propose to permit Part D sponsors to exclude specific protected class drugs from their formularies if they are a singlesource

drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration or to exclude single-source drugs or biological products that have certain price increases. We believe these exceptions would strengthen the Part D program by allowing Part D sponsors to better manage protected class drugs to help ensure their safe and appropriate use, limit the protected class requirement to the intended protected class indications, and provide Part D sponsors with additional tools to negotiate as competitive a price as possible in order to provide drug pricing relief for Medicare Part D enrollees, while maintaining beneficiary access to protected class drugs when used for protected class indications. Specifically, we are proposing three exceptions that would allow Part D sponsors to: (1) Implement broader use of prior authorization and step therapy for protected class drugs, including to determine use for protected class indications; (2) exclude a protected class drug from a formulary if the drug is a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and (3) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look back period. However, we note that these exceptions would apply only to the requirement that the drug be included on the formulary because it is a protected class drug. In other words, an exception from the protected class policy would not supersede our other formulary requirements in § 423.120(b)(2).

1. Background

a. History of the Protected Class Policy

Section 1860D-11(e)(2)(D)(i) of the Act requires that in order to approve a plan, we must not find that the design of the plan and its benefits (including any formulary and tiered formulary structure) are likely to substantially discourage enrollment by certain Part D-eligible individuals. We refer to this as our “non-discrimination” policy. Under this authority, in 2005 before the start of the Part D program, we directed Part D sponsors through guidance to include on their formularies all or substantially all drugs in six categories or classes: (1) Antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics.

This guidance helped to ensure a smooth transition of the approximately 6 million Medicare-Medicaid dually-eligible enrollees who were converting from Medicaid drug coverage to Medicare drug coverage at the start of the Part D program (79 FR 1937). Under the circumstances existing at the time of implementation of the Part D benefit, any formularies that did not have all or substantially all drugs in these categories or classes potentially would have been discriminatory for the dually-eligible population, because state Medicaid program formularies were generally open at the time compared to the Part D formularies that we were anticipating Part D sponsors to adopt prior to the beginning of the Part D program. Thus, it stood to reason that dually-eligible enrollees and many of their providers were largely unaccustomed to drug utilization management techniques. That is, for the most part they had little experience dealing with the rejection of a drug claim at the point-of-sale because the drug was either not on formulary, or another drug needed to be tried first, or because more information was required to determine whether the drug could be covered under the plan. Moreover, because the majority of the dually-eligible enrollees did not make a decision to elect their new plan but were instead auto-enrolled into a Part D plan, these individuals may not have understood or known whether their current medications would continue to be covered under their new Medicare Part D plan. Because the Part D program would be administered by private plans with extensive experience managing prescription drug costs through tighter formularies and a variety of utilization management techniques, we anticipated the need for a learning curve to avoid delays associated with navigating new plan prescription drug benefit processes beginning January 1, 2006 that might put at risk the enrollees who needed access to drugs in these particular categories or classes. Therefore, we established our policy for coverage of the six drug classes of clinical concern.

However, the circumstances that existed when this policy was originally implemented have changed dramatically in the nearly 12 years the program has been in operation. In addition to advances in e-prescribing, which can also provide streamlined e-prior authorization processes, CMS, Part D sponsors, providers, our partners that assist enrollees with making enrollment choices, and particularly dually-eligible enrollees and their advocates have had a great deal of experience working with Part D plans since 2005. Additionally, under § 423.120(b)(3), each Part D sponsor must provide for an appropriate transition process for Part D drugs that are not on its formulary. (For a detailed explanation of our transition requirements, see section 30.4 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, available at

https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.

We also finalized changes to the days' supply required by the Part D transition process in our April 2018 final rule (83 FR 16601). Other enrollee protections include our formulary requirements, formulary transparency, reassignment formulary coverage notices, and the expedited exception, coverage determination, and appeal processes.

After the Part D provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) were enacted in 2003, the Medicare Improvements for Patients and Providers Act (MIPPA) was enacted in 2008 and established specific criteria that should be used to identify drug categories or classes of Part D drugs of clinical concern for which all Part D drugs therein shall be included on Part D sponsor formularies. While we worked to identify them, the Patient Protection and Affordable Care Act was enacted in 2010 and superseded the MIPPA provisions. Section 3307 of the Patient Protection and Affordable Care Act amended section 1860D-4(b)(3)(G) of the Act to specify that the existing drug categories or classes of clinical concern would remain so until such time as the Secretary established new criteria to identify drug categories or classes of clinical concern under section 1860D-4(b)(3)(G) of the Act through notice and comment rulemaking.

Our next applicable notice and comment rulemaking was the January 2014 proposed rule titled “Medicare Program; Contract year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” (79 FR 1917) (hereinafter referred to as the January 2014 proposed rule). For purposes of the remainder of this Background section, we are summarizing the January 2014 proposed rule but are including detail when it is directly relevant to our current proposal.

In the January 2014 proposed rule (79 FR 1936), we proposed to interpret the Patient Protection and Affordable Care Act authority at section 1860D-4(b)(3)(G)(i) of the Act to limit protected classes to those for which access to all

drugs in the drug category or class is necessary: (1) In less time than the timeline for expedited exception, coverage determination, and appeals processes provide; and (2) when more specific formulary requirements would not suffice. This proposal would have specified that antidepressants, antipsychotics, and immunosuppressants for the treatment of transplant rejection were no longer protected classes. In response to comments, we did not finalize this proposal.

b. CMS Concerns With the Protected Class Policy and Proposals

The protected class policy, inclusive of its current limitations on prior authorization, is unique to the Medicare Part D program and does not appear elsewhere in other Federal programs, such as the Veteran's Health Administration (VA), TRICARE, the Federal Employees Health Benefits Program (FEHBP), the Affordable Care Act Essential Health Benefits (EHB) Benchmark Plans, or in commercial private health plans. We are concerned that requiring essentially open coverage of certain drug categories and classes presents both enrollee cost and welfare concerns, as well as increased costs for the Part D program as a result of overutilization (for example, antipsychotics used for sedation or lack of safety edits) and increased drug prices due to lack of competition between manufacturers to achieve inclusion on plan formularies. We have previously detailed concerns that the policy potentially facilitates the overutilization of drugs within the protected classes. By limiting the ability of Part D sponsors to implement utilization management tools (for example, prior authorization or step therapy requirements) for an entire category or class, we also limit their ability to prevent the misuse or abuse of drugs that are not medically necessary. Not only can this increase Part D costs, but inappropriate use can also lead to adverse effects that can harm the beneficiary and require medical treatment that would otherwise not have been necessary. We believe the profitability of products not subject to normal price negotiations as the result of protected class status is a strong incentive for the promotion of overutilization, particularly off-label overutilization, of some of these drugs.

Additionally, an open coverage policy substantially limits Part D sponsors' ability to negotiate price concessions in exchange for formulary placement of drugs in these categories or classes. Since the beginning of the Part D program we have heard from stakeholders that this policy—frequently referred to as the “protected classes” policy—significantly reduces any leverage the sponsor has in price negotiations and results in higher Part D costs. A report by the OIG in March 2011 documented similar assertions from selected Part D sponsors, including assertions that “they received either no or minimal rebates for the drugs in these six classes,” that “there is little incentive for drug manufacturers to offer rebates for these six classes of drugs because they do not need to compete for formulary placement,” and that “ `if [a rebate] is provided, it's probably at a lower percentage than [the rebate for the drugs] that had some competition.' ” (HHS Office of Inspector General, “Concerns with Rebates in the Medicare Part D Program”, March 2011, OEI-02-08-00050) (For a detailed explanation of these concerns, see the January 2014 proposed rule, 79 FR 1937.) We solicit comments on these concerns. Specifically, we ask commenters to provide evidence and research indicating that these concerns are warranted given real world experience.

Second, as a means to negotiate additional rebates, Part D sponsors can, in theory, subject enrollees to higher cost sharing by placing protected class drugs on non-preferred tiers (for example, non-preferred brand or non-preferred generic) or the “specialty tier.” However, Part D sponsors can only utilize the “specialty tier” if the cost of the drug exceeds the specialty tier threshold of $670 per month. Moreover, the 11.7 million dually-eligible enrollees whom the policy was originally intended to protect are shielded from the cost sharing usually applied to drugs on the non-preferred and specialty tiers because they receive a low-income cost-sharing subsidy. Thus, while a 2013 Avalere study found that Part D sponsors place anticonvulsants on higher tiers than do commercial plans, the data do not support the same conclusion for the five remaining protected classes. (Brantley, Kelly, Wingfield, Jacqueline, and Washington, Bonnie, Avalere, “An Analysis of Access to Anticonvulsants in Medicare Part D and Commercial Health Insurance Plans,” June 2013,

http://avalere.com/research/docs/Anticonvulsants_in_Part_D_and_Commercial_Health_Insurance.pdf.

) Finally, this option is not ideal because Part D sponsors typically apply rebates to reduce premiums, and therefore higher manufacturer rebates are not applied to reduce enrollee cost-sharing.

Indeed, many expert studies continue to demonstrate the role that the protected class policy plays in higher drug prices for protected class drugs in general. A 2008 study conducted by the actuarial and consulting firm Milliman found that the six protected drug classes disproportionately accounted for between 16.8 percent and 33.2 percent of total drug spend among sponsors surveyed (Kipp RA, Ko C). (See “Potential cost impacts resulting from CMS guidance on `Special Protections for Six Protected Drug Classifications' and Section 176 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275)” available at:

http://amcp.org/WorkArea/DownloadAsset.aspx?id=9279

). Milliman reported that the Part D program administrators (Part D sponsors and PBMs) commented that the protected status of these drug classes limited Part D sponsors' ability to effectively negotiate lower costs with manufacturers since it is known that these drugs must be included on the formulary. The Milliman report estimated that affected drug costs were on average 10 percent higher than they would be in the absence of the protected class policy and that this represented $511 million per year in excess costs to beneficiaries and the Part D program. We note that numerous brand drug patents expired since this report was published, which might reduce cost projections. Another 2008 study from the National Bureau of Economic Research (NBER) suggested that while Medicare Part D led to a substantial decline in average pharmaceutical prices, Medicare-intensive drugs in protected classes did not experience price declines as did their counterparts not in protected classes and may have actually experienced price increases (Duggan M, Morton FS. 2010. “The Effect of Medicare Part D on Pharmaceutical Prices and Utilization,” American Economic Review, American Economic Association, volume 100(1), pages 590-607). Part D sponsors can still negotiate with manufacturers for preferred or non-preferred tier placement of protected class drugs, but CMS does not have any information on the justification for the relative magnitude of these rebates. However, it can reasonably be anticipated that such rebates would vary widely for individual manufacturers and sponsors, and anecdotal evidence would suggest the leverage these options provide sponsors may be minimal when compared to leverage available in connection with an initial decision regarding formulary inclusion, especially since tier placement has no impact on statutory LIS cost sharing

levels. Consequently, we would predict future savings for both beneficiaries and the Part D program from both increased price competition as newly approved drugs come onto the market and more immediate savings if plans were able to remove some currently covered agents from their formularies. Another recent study by Milliman, prepared on behalf of America's Health Insurance Plans (AHIP), found that brand drugs in the protected classes had the lowest proportion of drugs with rebates and the lowest rebates as a percentage of gross drug cost for those drugs receiving rebates. Out of 124 protected class brand drugs, 16 drugs (13 percent) received rebates, compared to 36 percent of brand drugs overall. Protected class brand drugs without rebates accounted for $16.3 billion in gross drug spending compared to $6.0 billion for protected class drugs with rebates. Of protected class brand drugs that received rebates, the average rebate as a percentage of gross drug cost was 14 percent, whereas non-protected brand drugs with direct competition had average rebates of 39 percent. (Milliman, “Prescription Drug Rebates and Part D Drug Costs: Analysis of historical Medicare Part D drug prices and manufacturer rebates.” July 2018.

https://www.ahip.org/wp-content/uploads/2018/07/AHIP-Part-D-Rebates-20180716.pdf.

) Additionally, although we are not able to speak to the actual rebate values provided by Milliman, CMS internal analyses of rebate data reported by Part D sponsors generally support Milliman's conclusion that Part D sponsors obtain substantially smaller rebates for protected class drugs than they do for non-protected class drugs.

In contrast to the numerous studies we reviewed that support the assertion that the limited negotiation ability Part D sponsors have for protected class drugs results in higher prices for such drugs, we identified at least one report, published by The Pew Charitable Trusts, that suggested that given the current high rates of generic use within the protected classes, there may be limited potential for savings from changes to the protected class policy, and that rebates on protected-class drugs are consistent with other brand-name drugs. (The Pew Charitable Trusts. “Policy Proposal: Revising Medicare's Protected Classes Policy.” March 7, 2018.

https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2018/03/policy-proposal-revising-medicares-protected-classes-policy.

) We disagree with these suggestions. First, as mentioned earlier in the preamble, CMS's internal analyses of rebate data reported by Part D sponsors generally support the assertion that Part D sponsors obtain substantially smaller rebates for protected class drugs than they do for non-protected class drugs. Second, the Pew study itself notes “the possibility that plans could obtain higher-than-average rebates for these products if they had a greater ability to exclude them from coverage.”

We conclude that despite some formulary flexibility and ability to use drug utilization techniques for protected class drugs, Part D sponsors are not able to negotiate rebates across the protected classes at levels commensurate with other Part D drugs or prescription drugs covered in the commercial market. Consequently, although we are not proposing to eliminate any of the protected classes, we now propose to use the authority under section 1860D-4(b)(3)(G) of the Act to propose revisions to § 423.120(b)(2)(vi). Specifically, we propose to permit Part D sponsors to implement prior authorization and step therapy requirements on protected class drugs for broader purposes than allowed currently and to exclude specific protected class drugs from their formularies based upon price increases or if they are a new formulation of a single-source drug or biological product with the same active ingredient or moiety that does not provide a unique route of administration, regardless of whether the older formulation is removed from the market. By “single-source drug or biological product,” we mean a covered Part D drug that is either produced or distributed under a new drug application (NDA) under section 505(b) of the Federal Food, Drug, and Cosmetic Act (FDCA) or is an authorized generic as defined in section 505(t)(3) of the FDCA, or a biological product licensed under section 351 of the Public Health Service Act. We believe these exceptions would strengthen the Part D program by allowing Part D sponsors to better manage the protected class drugs to help ensure their safe and appropriate use, limit the protected class requirements to the intended protected class indications, and provide Part D sponsors with additional tools to negotiate as competitive a price as possible in order to provide drug pricing relief to Medicare Part D enrollees. Specifically, we are proposing three exceptions that would allow Part D sponsors to: (1) Implement broader use of prior authorization and step therapy for protected class drugs, including to determine use for protected class indications; (2) exclude a protected class drug from a formulary if the drug is a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and (3) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look back period. However, we note that these exceptions would apply only to the requirement that the drug be included on the formulary because it is a protected class drug. In other words, an exception from the protected class policy would not supersede our other formulary requirements in § 423.120(b)(2).

2. Broader Use of Prior Authorization for Protected Class Drugs

Under section 1860D-4(b)(3)(G)(i)(II) of the Act, the Secretary can establish exceptions to permit a Part D sponsor to exclude from its formulary, or otherwise limit access through prior authorization or utilization management, a particular Part D drug that is otherwise required to be on the formulary because it is in a protected class. Moreover, this authority applies without regard to whether an enrollee is initiating therapy (new starts) or is currently taking a drug (existing therapy).

As explained earlier, although Part D sponsors can employ some drug utilization management techniques within the protected classes, their ability to do so is not comparable with the commercial market. We find this concerning because prior authorization, as a standard feature of larger, industry-wide utilization management programs, is an important tool to identify clinically inappropriate therapy and control costs within the Part D program. For example, coverage under Part D is not available for drugs that are not medically necessary or used for a medically-accepted indication, or for drugs covered under Medicare Parts A or B as prescribed and dispensed or administered. Therefore, existing limits on Part D coverage permit prior authorization as a tool to determine whether a drug is a Part D drug being used for a medically-accepted indication, as defined in section 1860D-2(e)(4) of the Act, or to verify a drug is medically necessary or is not covered under Medicare Parts A or B as prescribed and dispensed or administered, as specified under sections 1860D-2(e)(3)(A) and 1860D-2(e)(2)(B) of the Act. As another example, as previously discussed in this preamble, we have concerns regarding the overutilization of protected class drugs, and in particular, antipsychotic drugs, among Medicare Part D enrollees. (For a detailed explanation of these

concerns, see the January 2014 proposed rule, 79 FR 1938). Additionally, a number of protected class drugs have medically-accepted indications for non-protected class uses. CMS considers a medically-accepted indication consistent with the description of the drug category or class of the protected class to be a “protected class indication.” The protected class indications for anticonvulsants, antidepressants and antipsychotics, antiretrovirals, and antineoplastics in the Part D program would be seizure disorders, mental disorders, HIV/AIDS, and cancer, respectively. Because the statute at section 1860D-4(b)(3)(G)(iv) of the Act specifies “immunosuppressants for treatment of transplant rejection,” the protected class indication for immunosuppressants in the Part D program would be treatment of transplant rejection only.

For example, antineoplastic and immunosuppressant drugs are also used for medically-accepted indications (that is, a use that is approved by the Food and Drug Administration (FDA) or is supported by one or more citations included or approved for inclusion in specified compendia) that are not protected class indications, such as rheumatological disorders. Thus, unless a Part D sponsor can use prior authorization to determine the indication for which the drug has been prescribed, there is the potential to increase Part D program costs when there may be a less expensive alternative available to treat rheumatological disorders that would be clinically appropriate. Under this proposed policy, prior authorization requirements would be allowed for any protected class drug with more than one medically-accepted indication to determine that it is being used for a protected class indication, regardless of its status as a new start or existing therapy. This would strengthen an important tool Part D sponsors use to ensure clinically appropriate therapy (for example, to ensure use for a medically appropriate indication or medical necessity, or to implement step therapy or quantity limits), differentiate between protected and non-protected indications, and appropriate management of costs.

This proposal would expand the use of prior authorization within the protected classes to be consistent with what is currently permitted for non-protected classes given that (1) section 1860D-4(b)(3)(G)(i)(II) of the Act authorizes us to allow Part D sponsors to limit access to protected class drugs through prior authorization and utilization management for both new starts and existing therapy; (2) our expedited exception, coverage determination, and appeals processes are mature and have proven workable; and (3) Part D sponsors need additional tools to control costs of protected class drugs. Unlike our proposal in the January 2014 proposed rule, this expansion would preserve the six protected classes. Specifically, we propose to allow Part D sponsors to use prior authorization as is currently allowed for all other drug categories and classes, including to implement step therapy for protected class drugs or to determine use for protected class indications or both, without distinguishing between new starts or existing therapies, consistent with section 30.2.2 of Chapter 6 of the Medicare Prescription Drug Benefit Manual. We would also allow indication-based formulary design and utilization management for protected class drugs. This would be consistent with our July 25, 2018 Health Plan Management System (HPMS) memorandum titled, “Indication-Based Utilization Management,” in which we clarified that Part D sponsors can use indication-based utilization management for non-protected class drugs. (While the HPMS memo allows indication-based utilization management for non-protected class drugs starting in 2019, indication-based utilization management for protected class drugs would not be permitted until 2020, if this proposal is finalized.) It would also be consistent with our August 29, 2018 HPMS memorandum titled, “Indication-Based Formulary Design Beginning in Contract Year 2020,” which we are proposing to codify for protected class drugs later in this rule. While we are proposing to permit prior authorization for protected class drugs for both new starts and existing therapy, we would not approve onerous prior authorization criteria that are not clinically supported. As is required for all other drug categories and classes, these utilization management edits would be subject to our review and approval, as part of our annual formulary review and approval process, which includes formulary tier review, and relative to prior authorization and step therapy, restricted access, step therapy criteria, prior authorization outlier, and prior authorization criteria reviews. (For an extensive description of our annual formulary checks see the January 2014 proposed rule (79 FR 1939)). Also, we seek comment on whether this exception should be limited to new starts only.

We propose to codify this proposal by redesignating current § 423.120(b)(2)(vi)(C) as § 423.120(b)(2)(vi)(F), and adding an exception at new § 423.120(b)(2)(vi)(C) for prior authorization and step therapy requirements that are implemented to confirm that the intended use is for a protected class indication, ensure clinically appropriate use, promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval.

It has been brought to our attention that some Part D sponsors have assumed that, because all protected class drugs have to be on the formulary, that there is no need for retrospective drug utilization review, as described in section 10.6.1 of Chapter 6 of the Medicare Prescription Drug Benefit Manual (available at

https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf

). We would like to clarify that this is not, and has never been, the case, nor does this proposal obviate the requirement that Part D sponsors conduct retrospective drug utilization review on protected class drugs. Further, this exception does not preclude a Part D sponsor from taking appropriate action should they determine that, upon retrospective drug utilization review, protected class drugs were not prescribed for a particular individual for a medically-accepted indication or may have been fraudulent.

Additionally, we note that the August 2018 HPMS memorandum entitled, “Prior Authorization and Step Therapy for Part B Drugs in Medicare Advantage” and section II.F. of this proposed rule, entitled “Medicare Advantage and Step Therapy for Part B Drugs” would allow MA-PD plans to require step therapy of a Part B drug before a Part D drug. If both proposals in section II.A.2. of this proposed rule (this proposal, Broader Use of Prior Authorization for Protected Class Drugs) and section II.F. of this proposed rule are finalized, the result would be to allow MA-PD plans, starting in 2020, to require step therapy of Part B drugs before Part D drugs for the protected classes as well. Again, as is required for all other drug categories and classes, these step therapy requirements would be subject to our review and approval as part of our annual formulary review and approval process, which includes formulary tier review, and relative to prior authorization and step therapy, restricted access, step therapy criteria, prior authorization outlier, and prior authorization criteria reviews.

3. New Formulations

Before the start of the Part D program, we directed Part D sponsors to include on their formularies all or substantially all drugs in the six protected classes. “Substantially all” in this context meant that all drugs and unique dosage forms in these categories were expected to be included on Part D sponsor formularies, with the following exceptions:

• Multiple-source drugs of the identical molecular structure.

• Extended-release products when the immediate-release product is included.

• Products that have the same active ingredient or moiety.

1

1

The FDA, at 21 CFR 314.3 defines an active moiety to be “the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt (including a salt with hydrogen or coordination bonds), or other noncovalent derivative (such as a complex, chelate, or clathrate) of the molecule, responsible for the physiological or pharmacological action of the drug substance.” Such term could be used to describe different salts of the same drug, for example, metoprolol tartrate versus metoprolol succinate. Additionally, such term could be used to describe a given drug with two versions of itself that are identical in chemical structure, but are mirror images of each other, having left and right-handed versions, like a pair of gloves, and where one of those images (or “gloves”), exerts stronger pharmacological activity than the other and could be isolated to achieve a greater clinical effect, for example, citalopram versus escitalopram, or omeprazole versus esomeprazole. In these two examples, citalopram and omeprazole contain equal mixtures of both the right and left-handed versions of the drug, whereas escitalopram and esomeprazole represent isolates of only the left-handed versions.

• Dosage forms that do not provide a unique route of administration (for example, tablets and capsules versus tablets and transdermals).

However, we codified in our June 2010 final rule (75 FR 32858) an exception at § 423.120(b)(2)(vi)(A) for drug products that are rated as therapeutically equivalent (under the FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” also known as the Orange Book).

Since that time, one manufacturer introduced a more expensive extended-release version of a drug to the market while also withdrawing from the market the predecessor immediate-release version when no generic was available. We are concerned that such a scenario could arise with a protected class drug that might leave Part D sponsors with no option but to add the new, more expensive product to their formularies and could result in increased costs for Part D enrollees and the Part D program. To prevent such behavior from occurring within the protected classes, we propose to permit Part D sponsors to exclude from their formularies a protected class single-source drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration.

First, we would revise § 423.120(b)(2)(vi)(A) to reflect the forthcoming introduction of interchangeable biological products to the market. Specifically, we propose to amend § 423.120(b)(2)(vi)(A) to specify drug or biological products that are rated as—(1) therapeutically equivalent (under the Food and Drug Administration's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” also known as the Orange Book); or (2) interchangeable (under the FDA's most recent publication of the Purple Book: Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations).”

Second, we propose to add a new exception at new paragraph § 423.120(b)(2)(vi)(D) that would specify that, in the case of a single-source drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration, the new formulation may be excluded from a Part D sponsors' formulary.

Part D plans are not required to include a new formulation of a drug on their formularies when the older formulation is still available. This policy would still apply. In other words, the purpose of this proposed exception is to specify that even if a new formulation of a single-source drug or biological product in the protected class becomes the only formulation available, Part D sponsors could exclude it from their formularies, except as required by our other formulary requirements in § 423.120(b)(2) and subject to our review and approval, as part of our annual formulary review and approval process.

4. Pricing Threshold for Protected Class Drug Formulary Exclusions

As noted earlier, over the course of the Part D benefit, a number of Part D sponsors and pharmacy benefit managers (PBMs) have asked CMS to address their limited ability to negotiate manufacturer rebates and achieve appreciable savings relative to drugs within the protected classes. In addition to Part D sponsors' limited ability to negotiate rebates for protected class drugs, internal CMS analysis has also shown price trends for brand drugs are consistently higher for drugs in protected classes than such drugs in non-protected classes. On the whole, protected class drug prices have increased more than other, non-protected drug classes between 2012 and 2017. More recently, the allowed cost per days' supply increased by 24 percent for protected class brand drugs between 2015 and 2016 and by 14 percent between 2016 and 2017. In contrast, the allowed cost per days' supply increased by 16 percent for non-protected class brand drugs from 2015 to 2016, and showed no growth at all for such drugs from 2016 to 2017. Accordingly, in developing exceptions to the protected class policy to obtain better pricing for drugs in these classes, CMS considered whether protected class drugs with price increases over a certain threshold during a particular look-back period should be required to be on all Part D formularies.

We propose, effective for plan years starting on or after January 1, 2020, to permit Part D sponsors to exclude from their formularies any single-source drug or biological product that is a protected class drug whose price increases, relative to the price in a baseline month and year, beyond the rate of inflation. The rate of inflation would be calculated using the Consumer Price Index for all Urban Consumers (CPI-U). Specifically, we propose to add an exception at § 423.120(b)(2)(vi)(E) to specify that a part D sponsor can exclude from its formulary protected class single-source drug or biological products subject to our other formulary requirements in § 423.120(b)(2), that the Part D sponsor identifies, for which wholesale acquisition cost between the baseline date and any point in the applicable period has increased more than the cumulative increase in the CPI-U over the same period. The baseline date would be—(1) September 1, 2018 for drugs on the market as of September 1, 2018; or (2) the first day of the first full quarter after the launch date for drugs that enter the market after September 1, 2018. We also propose to add to § 423.100 a definition for the “applicable period” that would mean with respect to exceptions in accordance with § 423.120(b)(2)(vi)(E)—

• For contract year 2020, September 1, 2018 through February 28, 2019; or

• For contract year 2021 and subsequent years, September 1 of the third year prior to the contract year in which the exception would apply, through August 31 of the second year prior to the contract year in which the exception would apply.

First, we seek comment on whether an alternative pricing threshold to the CPI-U should be considered for this exception. The CPI-U is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. We proposed this pricing threshold for a variety of reasons. First, provided by the U.S. Department of Labor, Bureau of Labor Statistics, the CPI-U is a widely used and publicly available indicator of price inflation. There are also several examples of the CPI-U being used as an indicator of inflation in the administration of the Medicare and Medicaid programs. For example, the CPI-U is used as an integral part of the computation of the unit rebate amounts for innovator drugs in the Medicaid Drug Rebate Program. (The amount of rebate due for each unit of an innovator drug is based on statutory formulas of the greater of 23.1 percent of the Average Manufacturer Price (AMP) per unit or the difference between the AMP and the best price per unit and adjusted by the CPI-U based on launch date and current quarter AMP.) Moreover, several income and asset limits used to determine some aspects of Medicare eligibility are currently indexed to the CPI-U. Eligibility for Part D Low-Income Subsidies (LIS) depends on an applicant's assets falling below certain thresholds that are updated annually by the change in the CPI-U, and cost-sharing amounts paid by Part D LIS beneficiaries for Part D drugs are indexed to the CPI-U. The annual adjustment to the Part D catastrophic coverage threshold is also partially linked to the CPI-U. However, there are price indices that are more specific to health care inflation; there is a CPI specific to prescription drugs (CPI-PD), as well as a CPI specific to medical care more broadly (CPI-M). CMS would be open to considering one of these alternative measures for inflation, although these indices are not, to our knowledge, currently used in CMS programs as an indicator of inflation. While the fact that prices increase more quickly for protected class drugs may or may not have a greater impact on the CPI-PD, we note that one concern CMS considered with using the CPI-PD for this policy is that it would be “self-fulfilling”—that is, the CPI-PD would just measure the existing increase in drug prices, which we believe is unsustainable and would defeat the purpose of this proposed exception. We solicit comment as to whether one of these more specific indices should serve as the pricing threshold for this policy as opposed to the more general CPI-U. For more information on the price indices referenced here, see the website for the Bureau of Labor Statistics at

https://www.bls.gov/cpi/

.

Next, we are soliciting comment on whether an increase in a price other than the drug's WAC, such as the negotiated price, or some other pricing standard (for example, the Average Wholesale Price (AWP) or the National Average Drug Acquisition Cost (NADAC)), should be used to determine whether the protected class drug could be excluded from a Part D formulary. We are proposing to use WAC as the pricing standard because it is a widely available, published list price, and thus verifiable by CMS. WAC is also widely used across the pharmacy supply chain, and commonly forms the basis of acquisition costs and pharmacy reimbursement (negotiated price). For more information on historical drug pricing trends, see National Health Expenditures information at

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html

.

We also recognize that using the WAC (or any other public pricing standard) is mostly applicable to single-source drugs and biological products, given that payers typically use proprietary maximum allowable cost (MAC)—based pricing methodologies to pay for multisource generic drugs. Because MAC-based pricing methodologies are not generally public and transparent, we do not have a publicly available, reliable way to validate increases in MAC prices for generic drugs. Also, payers already pay a “maximum” cost for generic drugs, which makes changes in public list prices less relevant. Moreover, MAC price is the same for all generics related to the reference product, regardless of the list price. Per our discussion earlier in this preamble, we consider “single-source drugs and biological products” to be Part D drugs that are—(1) approved under a new drug application under section 505(b) of the FDCA; (2) an authorized generic drug as defined in section 505(t)(3) of the FDCA; or (3) in the case of a biological product, licensed under section 351 of the Public Health Service Act. We believe that limiting this exception policy to single-source drug and biological products is appropriate given the current lack of incentive to reduce prices as a result of the generally limited competition for such drugs. We also solicit comment on whether this exception policy should apply only to single-source drug and biological products, or whether a broader mix of drugs should be eligible for formulary exclusion in accordance with this proposed exception policy.

Further, because different medical conditions can warrant different routes of administration, multiple dosage forms may exist for a particular drug or biological product. Since drugs are available in multiple strengths and dosage forms, with each strength and form having its own, or even multiple, national drug code(s) (NDC), we propose to identify a protected class drug for purposes of this policy as all the NDCs assigned to the single-source drug or biological product name, including NDCs for all strengths, dosage forms, and routes of administration associated with a particular drug. Further, we propose that if the WAC for any NDC assigned to the drug increases faster than inflation (as described previously), that the Part D sponsor can exclude from its formulary all NDCs assigned to that drug. We solicit comment as to whether an increase in WAC beyond CPI-U for any NDC assigned to a particular brand drug or single-source generic drug should be grounds for allowing a sponsor to exclude all NDCs assigned to that drug from the formulary.

Moving into the operational components of the proposal, when determining the proposed baseline for drugs currently on the market, we wanted to select a date prior to the publication of this proposed rule and before the usual price increases that generally take place the first day of the last quarter of the year. That way, opportunities for price gaming would be decreased, and any price increases planned prior to the release of this proposed rule would not be incorporated and result in a higher baseline. For drugs not currently on the market, we believed choosing the WAC as of the beginning of a quarter would aid in operational ease and consistency. We therefore propose that the baseline WAC, which Part D sponsors would use to determine whether a protected class drug's price has increased faster than inflation, would be determined as follows: (1) For a single-source drug or biological product that was first marketed in the United States on or before September 1, 2018, the baseline WAC would be the WAC as of September 1, 2018; (2) for a single-source drug or biological product that is first marketed in the United States after September 1, 2018, the baseline WAC would be the WAC as of the date that is the first day of the first full quarter after the date the single-source drug or biological product was first marketed in the United States. For example, if a protected class drug is first marketed on

July 15, 2019, baseline WAC would be the WAC as of October 1, 2019. We propose that the increase in a drug's WAC would be determined by comparing the baseline WAC to the WAC at any point during the relevant applicable period (which we describe later in this section) for a contract year. We solicit comment on whether the WAC as of some date other than September 1, 2018 should be used as the baseline WAC for drugs that are on the market on or before September 1, 2018.

As previously noted, we propose that the increase in protected class drug's WAC would be compared to the corresponding cumulative increase in the CPI-U for the same period. To make this comparison, we propose that the baseline CPI-U for a protected class drug would be determined as follows: (1) For a single-source protected class drug or biological product that was first marketed in the United States on or before September 1, 2018, the baseline CPI-U would be the September 2018 CPI-U (which will be released in October 2018, but which we refer to as the September 2018 CPI-U in this proposed rule); and (2) for a single-source protected class drug or biological product that is first marketed in the United States after September 1, 2018, the baseline CPI-U would be the CPI-U for month in which the baseline WAC is established for the drug or biological product. To use our previous example, if a protected class drug is first marketed on July 15, 2019, the baseline CPI-U would be the CPI-U for October 2019.

We further propose that in making the comparison of the increase in a protected class drug's WAC to the corresponding increase in the CPI-U, the rate of change of CPI-U must be calculated on a cumulative basis for the same months for which the change in WAC is observed. For example, the change in WAC for a drug between September 1, 2018 and February 19, 2019 would be compared to the corresponding cumulative change in the CPI-U between September 2018 and February 2019. We also want to highlight that in the rare case that a CPI-U may be negative during the applicable period, note if the CPI-U goes down in a year that could lower the cumulative CPI-U for the applicable period.

We propose that in order for a protected class drug to be excluded from the formulary for a given plan year, the comparison of the WAC increase to the cumulative CPI-U increase would need to be measured for an “applicable period,” which we propose to define as described in this proposed rule. For contract year 2020, we propose that the applicable period is September 1, 2018 through February 28, 2019. The applicable period for contract years 2021 and thereafter would begin on September 1st, 3 years before the contract year in which the exception would apply, and end August 31st of the second year prior to the contract year in which the exception would apply (see Table 1). We note that the proposed applicable period for contract year 2020 is shorter given that the bids for contract year 2020 are due in June 2020, and in order for this policy to take effect in contract year 2020, a shorter applicable period is necessary to align with the Part D bid cycle, and for beneficiaries to start to benefit from this policy change, if finalized, as quickly as possible.

If a Part D sponsor determines that a protected class drug's WAC has increased faster than the corresponding cumulative increase in the CPI-U within the applicable period, we propose that the Part D sponsor could exclude the protected class drug from its formulary for the contract year associated with that applicable period. To effectuate such an exclusion, the Part D sponsor would be required to submit, along with its formulary submission, information sufficient to demonstrate that the drug or biological product meets the criteria for exclusion that we are proposing. CMS would review the information as part of its formulary review and approval process.

Please see Table 1 for an illustration of how we project the timeline for the implementation of this proposal.

We believe this timeline would allow Part D sponsors to take this policy into account as they negotiate pricing and rebates with manufacturers for the applicable contract year (that is, the contract year in which the exception from protected class status would apply). We understand that Part D sponsors begin negotiations with manufacturers for formulary status in early fall (October/November) of the year preceding the year in which bids are due for the upcoming plan year (that is, for contract year 2021, we believe that plans will begin negotiation with manufacturers in the fall of 2019, in advance of bids for contract year 2021 being due in June 2020). Ending the applicable period at the end of the third quarter annually allows the Part D sponsor to determine which protected class drugs (if any) could be excluded from the formulary in time to negotiate for their formulary inclusion and placement if desired.

We understand that the proposed applicable periods for contract year 2020 and contract year 2021 overlap from September 1, 2018 through February 28, 2019, such that if a manufacturer increases the WAC for a protected class drug during that time at a rate faster than the growth in CPI-U during that time, a Part D sponsor could exclude the drug from its formulary for both contract years 2020 and 2021. Part D sponsors should note that even if the exclusion policy is triggered for both plan years 2020 and 2021, our approval of formularies for each plan year would have to be obtained separately for the applicable formulary submission.

For additional clarity, we provide another example of how the proposed applicable periods would work. For contract year 2022, the applicable period would be September 1, 2019 through August 31, 2020. If during any month in the applicable period, the WAC for a protected class drug increases more than the cumulative change from the baseline CPI-U to the CPI-U at any time during the relevant applicable period, a Part D sponsor could exclude the drug from its formulary for contract year 2022.

Table 1—Proposed Pricing Threshold Policy Timeline for Calendar Years 2020 Through 2023

Date

Activity(ies)

September 1, 2018

Baseline WAC established for drugs on the market as of 9/1/2018. Applicable period for Contract Year 2020 and Contract Year 2021 begins.

October 2018

Baseline September 2018 CPI-U released.

February 28, 2019

Applicable period for Contract Year 2020 ends.

June 3, 2019

Deadline for submission of Contract Year 2020 Bids, Formularies, Transition Attestations, Prior Authorization/Step Therapy (PA/ST) Attestations, and P&T Attestations due from all sponsors offering Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

August 31, 2019

Applicable period for Contract Year 2021 ends.

September 1, 2019

Applicable period for Contract Year 2022 begins.

December 31, 2019

Contract Year 2019 ends.

January 1, 2020

Contract Year 2020 Begins. Approved formulary exclusions

begin

for drugs with increased price past the CPI-U in the applicable period for Contract Year 2020.

June 1, 2020

Deadline for submission of Contract Year 2021 Bids, Formularies, Transition Attestations, Prior Authorization/Step Therapy (PA/ST) Attestations, and P&T Attestations due from all sponsors offering Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

August 31, 2020

Applicable period for Contract Year 2022 ends.

September 1, 2020

Applicable period for Contract Year 2023 begins.

December 31, 2020

Contract Year 2020 ends. Approved formulary exclusions

end

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2020.

January 1, 2021

Contract Year 2021 begins. Approved formulary exclusions

begin

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2021.

June 7, 2021

Deadline for submission of Contract Year 2022 Bids, Formularies, Transition Attestations, Prior Authorization/Step Therapy (PA/ST) Attestations, and P&T Attestations due from all sponsors offering Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

August 31, 2021

Applicable period for Contract Year 2023 ends.

September 1, 2021

Applicable period for Contract Year 2024 begins.

December 31, 2021

Contract Year 2021 ends. Approved formulary exclusions

end

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2021.

January 1, 2022

Contract Year 2022 begins. Approved formulary exclusions

begin

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2022.

June 6, 2022

Deadline for submission of Contract Year 2023 Bids, Formularies, Transition Attestations, Prior Authorization/Step Therapy (PA/ST) Attestations, and P&T Attestations due from all sponsors offering Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

August 31, 2022

Applicable period for Contract Year 2024 ends.

September 1, 2022

Applicable period for Contract Year 2025 begins.

December 31, 2022

Contract Year 2022 ends. Approved formulary exclusions

end

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2022.

January 1, 2023

Contract Year 2023 Begins. Approved formulary exclusions

begin

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2023.

June 5, 2023

Deadline for submission of Contract Year 2024 Bids, Formularies, Transition Attestations, Prior Authorization/Step Therapy (PA/ST) Attestations, and P&T Attestations due from all sponsors offering Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

August 31, 2023

Applicable period for Contract Year 2025 ends.

September 1, 2023

Applicable period for Contract Year 2026 begins.

December 31, 2023

Contract Year 2023 ends. Approved formulary exclusions

end

for drugs who increased price past the CPI-U in the applicable period for Contract Year 2023.

For further clarity on this proposal, we provide an example of how we foresee calculations would take place to monitor changes in price to determine which protected class drugs could be excluded from the formulary on the basis of price increases.

Baseline WAC for Drug Y (as of September 1, 2018) = $100

Baseline CPI-U (for September 2018) = 100.0

February 15, 2019 WAC for Drug Y = $110

February 2019 CPI-U (released in March 2019) = 105.0

The rate of change of the WAC for Drug Y = (February 2019 WAC−Baseline WAC) ÷ 100 = ($110 − $100) ÷ 100 = 0.1 or 10 percent growth

The rate of change of the CPI-U = (February 2019 CPI-U−Baseline CPI-U) ÷ 100 = (105 − 100) ÷ 100 = 0.05 or 5 percent growth)

The WAC for Drug Y grew by 10 percent between September 2018 and February of 2019, whereas the CPI-U only grew by 5 percent cumulatively over the same time period. Therefore, the WAC for Drug Y grew faster than inflation in February 2019, which falls in the proposed applicable periods for both contract year 2020 and 2021. Thus, in this example, a Part D sponsor could exclude Drug Y from its formulary for both contract years 2020 and 2021.

Under our proposal, Part D sponsors would be responsible for monitoring price increases, determining the cumulative CPI-U increases for the corresponding applicable periods, and deciding whether they wish to submit for our approval a formulary that excludes protected class drugs with price increases that exceed the rate of inflation. As an alternative to this approach, we also considered an approach where each year, CMS would produce a list of protected class drugs a Part D sponsor could exclude from its formulary for a specified contract year as a result of the drug's WAC increasing, such that it exceeds the rate of inflation (that is, the CPI-U) as compared to the drug's baseline WAC. However, we declined to propose this approach, because we believe Part D sponsors will be better able to make these determinations more quickly, and we see merit and benefit in providing Part D sponsors with the flexibility to determine whether they would exclude the drug or negotiate with the manufacturer for formulary inclusion and placement. Having sponsors monitor price increases allows them immediate access to the information needed to inform bid submissions, particularly for contract year 2020. We solicit comment on the merits of our proposal to have Part D sponsors operationalize this exception policy by monitoring changes in WAC and CPI-U, or if a more effective approach would be for CMS to monitor these price changes and produce a list of drugs that could be excluded from Part D formularies for a given contract year. If commenters believe that CMS should be providing such a list, we solicit comment as to when that list should be released each year.

As noted previously, we propose that once a drug can be excluded from formularies as a result of a price increase described previously (that is, during any month of the applicable period), that the drug can be excluded

from formulary only for the contract year for which the applicable period applies (that is, a drug is excepted from protected class status in contract year 2020 if the price increases more than the CPI-U for any month in the contract year 2020 applicable period). Therefore, to exclude a protected class drug from its formulary for the next contract year, the Part D sponsor would need to monitor whether the WAC of the drug has increased faster than inflation for the next contract year's applicable period. If the WAC has increased beyond the applicable period CPI-U for the next contract year's applicable period, then it could be excluded from the formulary, but if the WAC has not increased beyond the applicable period CPI-U for the next contract year's applicable period, it could not be excluded from the formulary for that contract year. This would also mean that, for example, if the WAC for a protected class drug in February 2020 exceeded the rate of inflation, as of February 2020, the drug could be excluded from a Part D formulary for contract year 2022 even if the WAC were lowered below the rate of inflation in March 2020.

However, we note that just because a protected class drug

can

be excluded from formulary under this proposed policy, it does not mean that a Part D sponsor

must

exclude the drug from formulary. Rather, we believe that instead, manufacturers and Part D sponsors could negotiate rebate arrangements for formulary placement of these protected class drugs as they do for non-protected-class drugs, and in such an event Part D sponsors could continue to include drugs on formulary even if their WACs exceeded the rate of inflation in the applicable period. We also considered whether to propose that a Part D sponsor could exclude a protected class drug could from its formulary for

any

future contract year once its WAC increased more rapidly than the cumulative increase in inflation. We solicit comment on such a policy approach.

In order to maximize the impact this policy would have on addressing high-cost drugs in protected classes, we also considered whether we should apply this price threshold exception to

all

drugs in the protected classes of a given manufacturer if

any one

of those drugs' WAC, when compared to the baseline WAC, increases beyond the cumulative rate of inflation. For example, if a manufacturer makes three protected class drugs, but the WAC for only one of those drugs increases beyond the CPI-U from its baseline WAC, we contemplated proposing that all three of those drugs could be excluded from the formulary. We solicit comment on this iteration of the proposed exception policy.

To assuage any concerns that the proposed regulatory change would reduce access to protected class drugs, we again note that even if a protected class drug could be excluded from a Part D formulary under this proposed policy, Part D sponsors are not required to do so. Nothing in this proposal would prohibit the Part D sponsor from including the drug on its formulary. Moreover, it is our expectation that this exception policy would benefit the program and beneficiaries by encouraging manufacturers to work with Part D sponsors to ensure formulary inclusion and favorable access (for instance, better cost sharing, more competitive negotiated prices, etc.) for Part D enrollees, rather than a loss of formulary inclusion for drugs in the protected classes. Finally, we note that existing enrollee protections, namely the coverage determination and appeal process, and the Part D formulary requirements as discussed elsewhere in this preamble, provide safeguards to access to all prescription drugs. These safeguards would continue to be available to protect enrollees' access to their medically necessary medications. For instance, our annual formulary review and approval process includes extensive checks to ensure adequate representation of all necessary Part D drug categories or classes for the Medicare population. We remind stakeholders, in particular Part D sponsors, that even if a protected class drug could be excluded from the formulary for a contract year, on the basis of this proposed exception to the protected class requirements, the drug may be required to be included on the formulary for other reasons, for example, if the drug is needed to fulfill other applicable formulary requirements, such as the protected class drug in question is required to be on formulary because it is the only drug available in its category or class. CMS solicits comment on the impact of this policy proposal on Part D enrollees.

5. Solicitation of Comment for Special Considerations

In considering whether exceptions to the added protections afforded by the protected class policy are appropriate, we take other enrollee protections in the Part D program into account. There are five such enrollee protections, and these are formulary transparency, formulary requirements, reassignment formulary coverage notices, transition supplies and notices, and the expedited exception, coverage determination, and appeals processes. (For a detailed discussion of these protections, see the January 2014 proposed rule, 79 FR 1938.) Our formulary review and approval process includes a formulary tier review, and for prior authorization and step therapy, we also conduct restricted access, step therapy criteria, prior authorization outlier, and prior authorization criteria reviews. Additionally, our formulary review and approval process takes into consideration the applicable indication, proposed applicability to new or continuing therapy, and likelihood of comorbidities when reviewing PA/ST criteria submitted to CMS by Part D plans. We note that best practice utilization management practices would not require an enrollee who has been stabilized on an existing therapy of a protected class drug for a protected class indication to change to a different drug in order to progress through step therapy requirements, and we would not expect Part D sponsors to require, nor would CMS be likely to approve, this if our proposed exceptions to the protected class policy were finalized. Moreover, we believe our current approach that ensures at least one drug within the class is offered on a preferred tier and free of prior authorization and step therapy requirements are working well and should be maintained. Currently, Part D formularies frequently have more than one protected class drug at a preferred cost sharing level, especially in classes with significant generic availability, without any prior authorization or step therapy requirement, and we would not expect that this proposal would prompt Part D sponsors to stop including protected class drugs on tiers with preferred cost sharing. (For a detailed discussion of our formulary review processes, see the January 2014 proposed rule, 79 FR 1939.) Finally, our transition policy will continue to require Part D sponsors to provide all new enrollees that are currently taking a protected class drug with an approved month's supply if the Part D sponsor will be utilizing prior authorization to confirm if an enrollee is a taking a protected class drug for a protected class indication. (For a detailed discussion of our transition requirements, see the January 2014 proposed rule, 79 FR 1940, and regulations at § 423.120(b)(3).)

Nonetheless, we wish to make certain that our three proposed exceptions (that is, broader use of prior authorization, new formulations, and pricing thresholds) to the protected class policy would not introduce interruptions for

enrollees on existing therapy of protected class drugs for protected class indications.

We seek comment on whether there are additional considerations that would be necessary to minimize: (1) Interruptions in existing therapy of protected class drugs for protected class indications during prior authorization processes; and (2) increases in overall Medicare spending from increased utilization of services secondary to adverse events from interruptions in therapy. These could include, but are not limited to, for example, special transition considerations for on-formulary protected class drugs for which the Part D sponsor has established prior authorization requirements, or as another example, for transitioning some enrollees taking protected class drugs for protected class indications to alternative Part D drugs. If so, we seek comment on why our current requirements and protections are inadequate, or could be improved. In addition, we seek comment on what specific patient population(s), individual patient characteristic(s), specific protected class drugs or individual protected drug classes would require such additional special transition or other protections and how such population(s) can be consistently identified. Finally, we seek comment on other tools that could be used to minimize interruptions in existing therapy of protected class drugs for protected class indications during prior authorization processes, for example, wider use of diagnosis codes on prescriptions, e-PA during e-prescribing, targeting protected class drugs in Medication Therapy Management (MTM) programs, or, as another example, expanded use of a data-sharing tool to exchange information for enrollees transitioning from one plan to another.

B. Prohibition Against Gag Clauses in Pharmacy Contracts (§ 423.120(a)(8)(iii))

In October 2018, Congress enacted the “Know the Lowest Price Act of 2018” (Pub. L. 115-262). The measure, which amends section 1860D-4 of the Act by adding a paragraph (m), prohibits Medicare Part D plan sponsors from restricting their network pharmacies from informing their Part D plan enrollees of the availability of prescription drugs at a cash price that is below what that the enrollee would be charged (either the cost sharing amount or the negotiated price when it is less than the enrollee's cost sharing amount) for the same drug under the enrollee's Part D plan. In effect, the legislation prohibits Part D sponsors from including in their contracts with their network pharmacies “gag clauses”, a term used within the prescription drug benefit industry that refers to provisions of drug plan pharmacy contracts that restrict the ability of pharmacies to discuss with plan enrollees the availability of prescriptions at a cash price that is less than the amount the enrollee would be charged when obtaining the prescription through their insurance. The measure becomes effective with the plan year starting January 1, 2020.

To make the Part D regulations consistent with the statute governing the Part D program, we propose to incorporate the new requirement into the Part D regulations. Specifically, we propose to amend the set of pharmacy contracting requirements at § 423.120(a)(8) by adding a paragraph (iii) that provides that a Part D sponsor may not prohibit a pharmacy from, nor penalize a pharmacy for, informing a Part D plan enrollee of the availability at that pharmacy of a prescribed medication at a cash price that is below the amount that the enrollee would be charged to obtain the same medication through the enrollee's Part D plan.

C. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)

1. Legislative Background

Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) requires the adoption of Part D eRx standards. Prescription Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations offering Medicare Advantage Prescription Drug Plans (MA-PD) are required to establish electronic prescription drug programs that comply with the e-prescribing standards that are adopted under this authority. There is no requirement that prescribers or dispensers implement eRx. However, prescribers and dispensers who electronically transmit and receive prescription and certain other information for covered drugs prescribed for Medicare Part D eligible beneficiaries, directly or through an intermediary, are required to comply with any applicable standards that are in effect. For a further discussion of the statutory basis for this proposed rule and the statutory requirements at section 1860D-4(e) of the Act, please refer to section I. of the eRx and the Prescription Drug Program February 2005 proposed rule (70 FR 6256).

2. Regulatory History

Part D eRx standards are periodically updated to take new knowledge, technology, and other considerations into account. CMS currently requires providers and dispensers to utilize the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard, Implementation Guide Version 10.6, which was approved November 12, 2008, to provide for the communication of a prescription or prescription-related information for certain named transactions. As of January 1, 2020, however, prescribers and dispensers will be required to use the NCPDP SCRIPT standard, Implementation Guide Version 2017071, which was approved July 28, 2017 to provide for the communication of prescription or prescription-related information between prescribers and dispensers for the old named transactions and a handful of new transactions named at § 423.160(b)(2)(iv). We also currently require (under §  423.160(b)(5)) Medicare Part D plan sponsors and prescribers to convey electronic formulary and benefits information amongst themselves using either Version 1, Release 1 (Version 1.0), from October 2005, or Version 3 Release 0 (Version 3.0), from April 2012 of the National Council for Prescription Drug Programs (NCPDP) Formulary and Benefits Standard Implementation Guides. (For a detailed discussion of the regulatory history of eRx standards see the November 2017 proposed rule (82 FR 56437 and 56438).

The NCPDP SCRIPT eRx standards (SCRIPT) and the NCPDP Formulary and Benefits standards (F&B) have become critical components of the Part D program. Thus far in 2018, 66 percent of Part D prescriptions were written electronically using the applicable SCRIPT standard, and all Part D plans implement electronic F&B using one of the adopted standards. However, based on industry feedback, we understand that while some prescribers rely on electronic F&B transactions to support prescribers during the eRx process, others do not. For example, vendors of electronic medical records (EMR) systems have stated that some of their clients find F&B data useful, but approximately half of their clients chose not to access F&B data at all. F&B is a batch mode transaction standard by definition, and therefore does not provide real-time information. A batch transaction allows plans to send the information nightly, weekly or even monthly. As plans make routine changes in their formularies, they may/may not be captured on the batch

formulary files. In addition, F&B provides information on a contract level, rather than a patient level, and consequently could not provide out-of-pocket costs for a given patient at a given point in time.

We are proposing to require a real-time benefit tool (RTBT) requirement on Part D sponsors to serve as a critical adjunct to the existing SCRIPT and F&B electronic standards. There is no requirement that prescribers or dispensers implement electronic prescribing but the existing SCRIPT standard allows prescribers means of conducting electronic prescribing, while the F&B standard allows a prescriber to see what is on the plan's formulary, but neither of those standards can convey patient-specific real-time cost or coverage information that includes formulary alternatives or utilization management data to the prescriber at the point of prescribing. If finalized, RTBT data would be layered on top of F&B data to gain a complete view of the beneficiary's prescription benefit information. It will augment the information available in F&B because, though F&B is useful, it is a batch mode transaction standard by definition and therefore does not provide real-time information. Further F&B provides information on a contract level, rather than a patient level, and consequently could not provide information about out-of-pocket costs for a given patient at a given point in time.

As described in more detail in the next section, we believe requiring plans to make one or more RTBT available to prescribers will lead to higher prescriber use of F&B information during the eRx process. To be eligible for selection by a Part D sponsor, we propose to require that the RTBT be capable of integrating with prescribers' eRx and EMR systems and providing patient-specific coverage information at the point of prescribing to enable the prescriber and patient to collaborate in selecting a medication based on clinical appropriateness and cost. We believe that furthering prescription price transparency is critical to lowering overall drug costs, and patients' out-of-pocket costs, and anticipate improved medication adherence, and supports for the MMA objectives of patient safety, quality of care, and efficiencies and cost savings in the delivery of care if our proposals are finalized.

3. Proposed Adoption of a Real-Time Benefit Tool

The Medicare Part D program allows contracted entities that offer coverage through the program latitude to design plan benefits, provided these benefits comply with all relevant program requirements. This flexibility results in variation in Part D plans' benefit design, cost-sharing amounts, utilization management tools (that is, prior authorization, quantity limits, and step therapy), and formularies (that is, covered drugs). We are aware of several Part D prescription drug plans that have begun to offer RTBT inquiry and response capabilities to some physicians to make beneficiary-specific drug coverage and cost data visible to prescribers who wish to use such data at the point-of-prescribing. We have reviewed multiple RTBT software solutions and have found that they are generally designed to provide patient-specific clinically appropriate information on lower-cost alternative therapies through the prescribers' eRx or EMR systems, if available, under the beneficiary's prescription drug benefit plan. However, for those software solutions that are capable of providing such decision support, based on our current experience, we understand that the prescribers will only embrace the technology if the prescriber finds the information to be readily useful. Thus, to ensure success, we believe that the Part D sponsor must present prescribers with formulary options that are all clinically appropriate and accurately reflect the costs of their patient's specific formulary and benefit options under their drug benefit plan. In addition, those who use plans' current RTBT technology report that prescribers are most likely to use the information available through RTBT transactions if the information is integrated into the eRx workflow and electronic medical record (EMR) system. This would allow the prescriber and patient, when appropriate, to choose among clinically acceptable alternatives while weighing costs. Since eRx can generally be performed within the provider's EMR system, integration of the RTBT function within the EMR generally, and the eRx workflow specifically appears to be critical for the successful implementation of the technology. However, we recognize that without a standard for RTBT, prescribers may be offered multiple technologies, which may overwhelm and create burden for EMR vendors. We also recognize that without a standard, the RTBT tool provided may not be integrated with a prescribers' EMR, thus limiting its utility.

We are interested in fostering the use of these real-time solutions in the Part D program, given their potential to lower prescription drug spending and minimize beneficiary out-of-pocket costs. Not only can program spending and beneficiary out-of-pocket costs be reduced, but evidence suggests that reducing medication cost also yields benefits in patients' medication adherence. In a 2012 review of studies investigating how patient out-of-pocket costs affects medication adherence and outcomes, researchers found that 85 percent of studies demonstrated that increasing patient cost-share for a medication was associated with a significant decrease in medication adherence.

2

This review also revealed that 86 percent of these studies demonstrated that increased medication adherence was associated with improved clinical outcomes. With respect to studies that directly measured the impact of out-of-pocket costs on outcomes, 76 percent found that increased medication out-of-pocket costs was associated with adverse non-medication related outcomes such as additional medical costs, office visits, hospitalizations, and other adverse events. Subsequently published studies continue to reflect similar findings.

3

4

2

Eaddy, M.T., Cook, C.L., O'Day, K., Burch, S.P., & Cantrell, C.R. (2012). How Patient Cost-Sharing Trends Affect Adherence and Outcomes: A Literature Review. Pharmacy and Therapeutics, 37(1), 45-55.

3

Hershman, D.L., Tsui, J., Meyer, J., et al. (2014). The change from brand-name to generic aromatase inhibitors and hormone therapy adherence for early-stage breast cancer. Journal of the National Cancer Institute. 106(11), dju319.

4

Chen SY, Shah SN, Lee YC, et al. (2014). Moving branded statins to lowest copay tier improves patient adherence. American Journal of Managed Care. 20, 34-42.

Therefore, we are proposing that each Part D sponsor be required to implement a RTBT capable of integrating with prescribers' eRx and EMR systems to provide complete, accurate, timely, clinically appropriate and patient-specific real-time formulary and benefit information to the prescriber. While we recognize that there currently is no industry-established transaction standard for RTBTs for CMS to propose adopting, we believe it is appropriate to require implementation of solutions based on available technologies. There appear to be multiple existing technologies capable of interfacing with multiple EMR systems and providing to prescribers the patient-specific real-time coverage information we have described in this preamble, and, given that, that it would be inappropriate to wait any longer for an industry-wide standard to be developed given current concerns about drug prices. Under this proposed rule Part D plan sponsors would be required to select or develop an RTBT capable of integration with at least one prescriber's EMR and eRx systems; we

encourage EMR and eRx vendors to work with Part D plans to ensure that the information can be requested and viewed in real time by a user of their product at the point of prescribing. In order to meet this proposed requirement, each Part D plan sponsor will be required to implement an RTBT that is capable of integrating with at least one of prescribers' eRx and EMR systems to provide the prescriber with complete, accurate, timely, and clinically appropriate patient-specific real-time formulary and benefit information at the point of eRx. Each system response value would need to show an accurate reflection of how the prescription claim would be adjudicated given the information submitted and the claims history of the patient with that plan, including relevant indications that could impact coverage, at the time the prescriber query is made. Further, the system would be required to present real-time values for the patient's cost-sharing information and additional formulary alternatives. This requirement would include the formulary status of clinically appropriate formulary alternatives, including any utilization management requirements, such as step therapy, quantity limits and prior authorization, and indications-based restrictions, for each specific alternative presented.

We are interested in bringing RTBT's benefits to the Part D program as soon as feasible. In evaluating how quickly plans could choose and implement an RTBT functionality, we note that a number of firms have already developed the technology required to provide the information we describe through some eRx/EMR systems. Pharmacy benefit managers (PBMs) that service the majority of Part D plans, and a few plans themselves, have successfully implemented RTBTs for a small subsection of the plans' enrollment, which were capable of conveying the information described and interfacing with most EMR and eRx products. We believe that should RTBT systems continue to result in reduced drug costs, plans will expand the number of prescribers who have access to RTBT technologies over the next several years, ultimately paving the way for universal RTBT deployment within Part D in contract year 2020. As plans develop their formularies and benefit packages for 2020, we believe that they will be able to include RTBT implementation in the 2020 planning process. Because section 1860D-12(f)(2) of the Act prohibits the implementation of “significant” regulatory requirements on a prescription drug plan other than at the beginning of the calendar year, if finalized, we are proposing to implement the RTBT requirement on January 1, 2020.

We also encourage plans to use RTBTs to promote full drug cost transparency by showing each drug's full negotiated price (as defined in 42 CFR 423.100), in addition to the beneficiary's out-of-pocket cost information. Displaying both values would provide prescribers with additional decision support by providing visibility into both their patients' cost-sharing amounts as well as total cost to the Medicare program. Viewing negotiated price at the point of prescribing would be of particular interest when alternative drugs in a plan's formulary have comparable out-of-pocket costs and clinical value; in those cases a prescriber may consider negotiated prices as well, which would be of value to the Medicare program. For this reason we encourage plans to include negotiated price with their RTBT solution, although we are not proposing to make it a requirement at this time.

We believe that beneficiaries will benefit from their prescribers' use of RTBT. However, we would caution that RTBT should not be used by providers to evaluate alternatives for drugs prior to discussing whether the patient intends to self-pay for the prescribed drug. Such practices will preserve the patient's ability to exercise their right under the privacy regulations promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA)

5

and modified pursuant to, among other laws, the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009.

6

If requested by the individual, the HIPAA Privacy Rule at 45 CFR 164.522 requires covered entities to agree to a restriction of the disclosure of PHI to a health plan for payment and health care operations when an individual pays for the item or service out-of-pocket in full.

5

See

the Administrative Simplification provisions of title II, subtitle F, of the HIPAA (Pub. L. 104-191), which added a new part C to title XI of the Social Security Act (sections 1171-1179 of the Social Security Act, 42 U.S.C. 1320d-1320d-8).

6

The HITECH Act was enacted as title XIII of division A and title IV of division B of the American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5).

Therefore covered health care providers using the RTBT should ensure that individuals are aware that information about services or treatment, such as a future prescription, may be disclosed to the plan by the tool and effectuate the individual's disclosure restriction request by refraining to use the tool in instances in which the patient intends to self-pay in full. Covered health care providers should discuss with the individual whether the individual desires the prescriber to use the RTBT as doing so would generally eliminate the beneficiary's ability to request disclosure restrictions as the plan would already be in possession of the query data regarding the desire to prescribe something for a specified condition.

We considered building upon the existing F&B standard to provide prescribers with decision support. Under this scenario, we would require that plans use the existing NCDP Formulary and Benefit (F&B) Standard (version 1.0 or 3.0) but modify our requirement for Part D so that plans would be required to populate certain optional fields such as copay tier, dollar copay value, and utilization management criteria for each drug. We considered this option as a solution because it would be built upon an existing transaction standard and allow interface with all EMR systems to deliver the information to the prescriber within the normal workflow. However, we believe that a prescriber tool that relied on the F&B would fail to provide the real-time information currently used by many plans. Many prescribers have chosen not to include F&B information in their EMRs because they view the information presented as unreliable as the data is not specific to the patient's benefit plan. Given the inherent complexities associated with Part D formularies and benefits, we concluded that under this option, the patient information available to the practitioner at the time of prescribing would often lack sufficient and current detail necessary for clinical decision-making, which could lead to confusion for prescribers and patients. For example, we understand that a plan that had a prior authorization in place for a targeted portion of its population conveyed the prior authorization requirement for all patients. The plan's rationale was that they would not know which patient was accessing the F&B data, so the plan chose to include the requirement for all enrollees rather than the reverse which would be to omit the requirement for some of their enrollees. Similarly the F&B standard could convey a step therapy requirement for the population at large, but could not discern whether or not an individual patient had fulfilled the requirement.

However, in spite of these shortcomings, including the inherent lack of beneficiary-specific formulary information or its batch-only

functionality, we continue to believe that the NCPDP F&B 1.0 and 3.0 continue to provide value to the Part D program, and, as a result, we are not proposing to retire those standards. This value is evidenced by the fact that, as previously noted, many EMRs convey F&B data to their prescribers. Even strong proponents of adopting RTBT state that the standards work best when used with F&B. They state that F&B can provide a general view of the plan's formulary while RTBT aids the prescriber in choosing between the formulary alternatives offered.

7

We also note that where a prescriber has limited formulary choices due to the patient's specific clinical condition, F&B may provide all the information needed. Finally many EMRs use the F&B and RTBT transactions in different places within in the eRx work-flow. Therefore, we believe that both the F&B and RTBT transactions add value to the eRx process and are not interchangeable and should be used in tandem.

7

https://www.pocp.com/hit-drug-price-transparency-opportunities

.

Prior to proposing that each Part D plan choose an RTBT tool to support, we sought to identify an industry standard that could be used throughout the Part D program. We prefer industry-wide standards when they are available due to their significance in promoting collaboration and interoperability across industry partners. Unfortunately, we were unable to identify a suitable RTBT standard that has been balloted and approved by an accredited standard setting body to ensure interoperability. However, we are aware that efforts are underway to develop RTBT standards, and are hopeful that they will come to fruition in the near future. We are interested in, and solicit comments on, assessments from knowledgeable parties about whether any of the standards that are currently under development may be suitable to meet our intended purposes described herein. Based on these considerations, we are proposing to amend § 423.160(b) by adding the requirement that all Part D plan sponsors implement one or more RTBT by January 1, 2020 to be used with the patient's consent. This would require that each Part D plan carefully review the drugs that exist on the formulary and determine which, if any, formulary alternatives exist. The plan's RTBT system would integrate with automated prescriber systems (eRx or EMR) to present a list of the formulary alternatives to the prescriber along with any applicable utilization management requirements and patient's cost sharing for each one. This would allow, with the patient's consent, a prescriber to consider both the clinical appropriateness and patient copayment of a drug during the prescribing process. If finalized, this tool could provide complete, accurate, timely and clinically appropriate patient-specific real-time formulary and benefit information that could be capable of integrating with prescriber's eRx and EMR systems. Formulary and Benefits information delivered through the RTBT would be required to include patient-specific adjudication and out-of-pocket cost information, and would be required to provide decision support reflecting clinically appropriate formulary alternatives and utilization management requirements such as step therapy, quantity limits and prior authorization requirements.

We welcome comments on this proposal, including the feasibility for plans to meet the proposed January 1, 2020 deadline. We understand that should this proposal be finalized some Part D plans may need to invest considerable resources in order to execute effective RTBT solutions. At a minimum, each plan will need to scrutinize individual formulary drugs to see whether lower cost alternatives exist, and evaluate how these alternatives can be presented in such a way that will be helpful to clinicians who make prescribing decisions for patients who may have multiple co-morbidities and conditions. We also realize that RTBT can only achieve the desired cost savings if plans can partner with medical records and eRx vendors to support these efforts by transmitting accurate the information to the prescriber in an easily actionable format. We welcome comments on how this proposal may or may not, expedite our goal of giving each Part D enrollee and the clinicians who serve them, access to meaningful decision support through RTBT. We also seek relevant feedback about RTBT standardization efforts; this includes the planned fulfillment of any milestones that standardization bodies have already met, or are likely to meet in advance of the proposed January 1, 2020 deadline. We would consider retraction of this proposed rule if we receive feedback indicating that the rule would be contrary to advancing RTBT within Part D, or if a standard has been voted upon by an accredited Standard Setting Organization or there are other indications that a standard will be available before the 2020 effective date of this proposed provision. In such case, we would review such standard, and if we find it suitable for our program consider proposal of that standard as a requirement for implementation in our 2021 rulemaking, effective January 1, 2021. We are also soliciting comments regarding the impact of this proposal on plans and providers, including overall interoperability and the impact on medical record systems. Finally, we are soliciting comments regarding the impact of the proposed effective date on the industry and other interested stakeholders.

D. Part D Explanation of Benefits (§ 423.128)

Section 1860D-4(a)(1)(A)(4) of the Act requires Part D sponsors to furnish to each of their enrollees a written explanation of benefits (EOB) and, when the prescription drug benefits are provided, a notice of the benefits in relation to the initial coverage limit and the out-of-pocket threshold for the current year. We codified this EOB and notice requirement at § 423.128(e) by requiring the Part D EOB to include all of the following information written in a form easily understandable to enrollees:

• The item or service for which payment was made and the amount of said payment.

• Notice of an individual's right to an itemized statement.

• Cumulative, year-to-date total amount of benefits provided (including the deductible, initial coverage limit, and the annual out-of-pocket threshold for the current benefit year).

• The cumulative, year-to-date total of incurred costs.

• Any applicable formulary changes.

Part D sponsors must provide enrollees with EOB no later than the end of the month following any month in which the enrollee utilized their prescription drug benefit.

Lowering prescription drug costs is of critical and immediate concern to beneficiaries, CMS and the Administration. “The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” released in May 2018

8

specifically solicited comment on improving the usefulness of the Part D Explanation of Benefits statement by including information about drug price changes and lower cost alternatives. As expected, many beneficiary advocacy groups submitted supportive comments regarding amending the Part D EOB. Many groups commended the Administration's desire to further

transparency efforts through improvements in beneficiary education materials, such as the Part D EOB. Requiring sponsors to include additional information about negotiated drug price changes and lower cost therapeutic alternatives in the EOB would help improve cost transparency of Part D prescriptions and mitigate drug price increases in the Part D program.

8

“The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” HHS (May 2018). Please see:

https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf.

The items required to be included in the EOB under the current regulation do not include information about negotiated price changes for each of the prescription drugs covered for a beneficiary, nor do they specify including information about lower cost therapeutic alternatives. Because we do not require this information under the regulation as currently written, for contract year 2019 as specified in the July 24, 2018, HPMS Memorandum, “Model Notice and Policy Updates,” we added an option for sponsors to use the existing notes field in the EOB for information on drug price increases and more affordable formulary alternatives.

9

9

See Part D Model Materials at:

https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Part-D-Model-Marketing-Materials.html.

We propose to redesignate paragraphs (e)(5) and (e)(6) of § 423.128(e) as paragraphs (e)(6) and (e)(7) to add a new paragraph (e)(5) to require sponsors to include information about negotiated price changes and lower-cost therapeutic alternatives in the Part D EOBs. First, as to information about negotiated drug price increases, we propose to require that Part D sponsors include the cumulative percentage change in the negotiated price since the 1st day of the current benefit year for each prescription drug claim in the EOB. For example, when a beneficiary fills a prescription under his or her Part D plan in April of the current benefit year that begins on January 1, the cumulative percentage by which the negotiated price has changed since January 1 of that year would display in the EOB. To illustrate, if the negotiated price of the beneficiary's medication was $100 in January, $102 in February, $103.50 in March, and $104 in April, the April EOB would display a 4 percent increase in the drug's negotiated price. Thus, this information would provide drug price trend information for the beneficiary for all their covered Part D drugs. We specifically request stakeholder feedback on operationalizing this in the EOB to best serve beneficiaries which could include, for instance, including information in the EOB on the percent change in negotiated price since the close of open enrollment in addition to the percent change in price since the 1st day of the benefit year.

Second, as to information about lower-cost therapeutic alternatives, CMS proposes to require that Part D sponsors provide information about drugs that are therapeutic alternatives with lower cost-sharing, when available as determined by the plan, from the applicable approved plan formulary for each prescription drug claim. Also, the plan may include therapeutic alternatives with the same copayments if the negotiated price is lower.

Lower-cost therapeutic alternatives (meaning drugs with lower cost-sharing or lower negotiated prices) would not be limited to therapeutically equivalent generics if the original prescription fill is for a brand drug. It could also include a different drug, not within the same category or class, but one that has a medically-accepted indication to treat the same condition. Additionally, we would not require information about formulary therapeutic alternatives available at lower cost sharing to be beneficiary-specific, and we acknowledge that alternatives may not always be available. However, Part D sponsors would be permitted and encouraged by CMS to include relevant beneficiary-specific information, such as diagnosis, the indication for the prescription and complete step therapy or exception requests, when providing formulary therapeutic alternatives in the EOB that have lower cost-sharing. As with including the negotiated price changes on EOBs, this mechanism would provide even greater transparency for beneficiaries when reviewing their annual out-of-pocket costs for prescriptions.

These two proposed requirements would help improve cost transparency of Part D prescriptions. Updating the Part D EOB requirements as we propose would provide greater information to beneficiaries by displaying the fluctuations in their prescription drug prices, so that they can become more educated concerning their drug costs and about potential lower cost alternative drugs. This in turn should spark dialogue between the Part D beneficiaries and their providers about possible lower cost therapeutic alternatives, and empower them to make more informed decisions when choosing a prescription.

The Part D EOB is one of the principal documents that beneficiaries can rely on to understand where they are in the benefit phases and their changing out-of-pocket costs throughout the year. This document is provided to beneficiaries every month for the immediately preceding month that the Part D benefit is used. As a retroactive monthly report, the EOB is the means by which beneficiaries can monitor their benefit utilization and prescription costs on a regular and frequent basis.

Given the frequency of EOB issuance, the proposed policy would help call beneficiaries' attention to drug prices and more affordable options on an ongoing, regular basis. The current structure of the model EOB is well-suited to include additional information on individual prescription drug claims. Other beneficiary materials are delivered on an annual basis. These documents are geared toward assisting Part D beneficiaries make enrollment decisions whether to remain with their current prescription drug plan or switch to another. By viewing these costs on a monthly basis in EOBs, beneficiaries would be much more up-to-date with regard the impact of drug prices and whether there are less expensive options available. We solicit comment on these proposed changes to the Part D explanation of benefits, including impact on the beneficiary.

F. Medicare Advantage and Step Therapy for Part B Drugs (§§ 422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, 422.619)

In a HPMS memo released August 7, 2018,

10

CMS announced that under certain conditions beginning in contract year 2019, MA plans may use utilization management tools such as step therapy for Part B drugs; such utilization management tools, including prior authorization, can be used by MA organizations to both prevent overutilization of medically unnecessary health services and control costs. This rule proposes requirements under which MA plans may apply step therapy as a utilization management tool for Part B drugs. In this proposal, we confirm MA plans' existing authority to implement appropriate utilization management tools, including prior authorization, for managing Part B drugs in a manner to reduce costs for both enrollees and the Medicare program. Under Part B, traditional Medicare generally pays based on a statutory formula—average sales price plus a 6-percent add-on—for drugs and biological products that are not usually self-administered, such as injections and infusions. We believe there is minimal negotiation between MA plans

and drug manufacturers to reduce the price of these drugs. Prior to the August 7, 2018 HPMS memo and subsequent FAQs,

11

CMS guidance

12

interpreted existing law to prohibit MA plans from using step therapy for Part B drugs because such a utilization management tool would create an unreasonable barrier to coverage of and access to Part B benefits that MA plans must provide under the law. However, CMS recognizes that utilization management tools, such as step therapy, can provide the means for MA plans to better manage and negotiate the costs of providing Part B drugs. As a result, we are proposing to allow MA plans to use step therapy, which we believe would considerably assist MA plans in negotiating on behalf of enrollees to get better value for Part B drug therapies, which constitute around $12 billion in CY 2016

13

in spending by MA plans.

10

Prior Authorization and Step Therapy for Part B Drugs in Medicare Advantage (August 2018). Retrieved from

https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/MA_Step_Therapy_HPMS_Memo_8_7_2018.pdf.

11

https://dpapportal.lmi.org/DPAPMailbox/Documents/Part%20B%20Step%20Therapy%20Questions%20FAQs_8-29-18.pdf.

12

Prohibition on Imposing Mandatory Step Therapy for Access to Part B Drugs and Services. (September 2012). Retrieved from

https://www.asrs.org/content/documents/cms_step_therapy_memo_091712-2.pdf.

13

Medicare Part B Drug. CMS Enterprise Portal. Retrieved at

https://portal.cms.gov/wps/portal/unauthportal/unauthmicrostrategyreportslink?evt=2048001&src=mstrWeb.2048001&documentID=AEC7511A11E817EF2FBA0080EFC5E3D8&visMode=0&currentViewMedia=1&Server=E48V126P&Project=OIPDA-BI_Prod&Port=0&connmode=8&ru=1&share=1&hiddensections=header,path,dockTop,dockLeft,footer.

We believe that these tools will better enable MA organizations to take steps to ensure that MA plans and MA enrollees pay less overall or per unit for Part B drugs which could result in lower MA capitation payments by the government to MA organizations and lower average sales prices for Part B drugs, on which Medicare FFS payments for such drugs are based, while also maintaining access to medically necessary Medicare-covered drugs and services. These goals—reducing costs across the Medicare program while ensuring access to medically-necessary Medicare-covered benefits—underlie this proposal. In the regulatory text, we propose adding a new regulation, at § 422.136, entitled “Medicare Advantage and Step Therapy for Part B Drugs.”

Sections 1852(c)(1)(G) and (c)(2)(B) of the Act, and the MA regulations at § 422.4(a)(1)(ii) expressly, reference a MA plan's application of utilization management tools, like prior authorization and other “procedures used by the organization to control utilization of services and expenditures;” this indicates that MA plans are not prohibited by the statute from implementing utilization management tools such as step therapy. Therefore, we are proposing requirements under which MA plans may apply step therapy as a utilization management tool for Part B drugs. We are also proposing to define step therapy in § 422.2. We solicit comments concerning the impact that allowing step therapy for Part B drugs would have on MA plans and enrollees. For contract year 2020 and subsequent years, coupling drug management coordination with rewards and incentives remains an option for MA plans to pass back savings to beneficiaries. Anticipated savings not passed on to beneficiaries through rewards and incentives must be reflected in the plan's bid. Additional Part C rebate dollars associated with the lower bid, as with all Part C rebate dollars, must be used to provide supplemental benefits and/or lower premiums for the plans' enrollees.

We acknowledge the potential for utilization management tools like step therapy to create administrative burden and process challenges for network providers. In light of that, we expect MA plans to work closely with the provider community and to adopt best practices that streamline requirements and minimize burden. We also encourage continued development and advancement of electronic prior authorization processes to more efficiently administer this process. We note that existing requirements in §§ 422.112(b) and 422.152 already require care coordination activities that are sufficient to promote positive health outcomes for both drugs and services, so we are not proposing text at § 422.136 that an MA plan must offer a drug management program. We solicit comment whether our proposed regulation text imposing education and information responsibilities in combination with existing regulations on care coordination are sufficient to ensure that MA organizations specifically address step therapy programs for Part B drugs as part of those care coordination responsibilities and if we should finalize a provision in § 422.136 that addresses the administrative burden imposed on network providers by MA plans.

This proposed rule would impose a number of safeguards that ensure enrollees have timely access to all medically necessary Medicare Part B medications. MA plans would be required to administer the existing organization determination and appeals processes under new proposed time frames that are similar to the timeframes applicable in Part D for coverage determinations; enrollees can request an organization determination if they believe that they need direct access to a Part B drug that would otherwise only be available after trying an alternative drug. MA plans would adjudicate these organization determinations based on medical necessity criteria. If an enrollee is dissatisfied with the plan's organization determination, the enrollee has the right to appeal. CMS monitors organization determination and appeals activity through the audit process to ensure enrollee requests are appropriately evaluated and processed within applicable timeframes.

Consistent with our existing disclosure requirements at § 422.111, when applying step therapy to Part B drugs, MA plans must disclose that Part B drugs may be subject to step therapy requirements in the plan's Annual Notice of Change (ANOC) (when initially adopted or subsequently changed) and Evidence of Coverage (EOC) documents. In the ANOC, this information must be included under the Changes to Benefits and Costs for Medical Services. In the EOC, this information must be included in the Medical Benefits Chart under “Medicare Part B prescription drugs.” Under existing requirements at § 422.202(b), MA plans must establish policies and procedures to educate and fully inform contracted health care providers concerning plan policies on utilization management, which would include the plan's step therapy policies. We propose to also include a requirement at § 422.136(a)(2) for plans to establish policies and procedures to educate and inform health care providers and enrollees specifically concerning its step therapy policies. We note that preferred provider organization plans (PPOs) are required, as part of the definition of PPO at section 1852(e)(3)(iv)(II) of the Act and under the MA regulation at § 422.4(a)(1)(v)(B) to reimburse or cover benefits provided out of network; while higher cost sharing is permitted, PPOs are prohibited from using prior authorization or preferred items restrictions in connection with out of network coverage. As such, preferred provider organization plans (PPOs) must provide reimbursement for all plan-covered medically necessary services received from non-contracted providers without prior authorization or step therapy requirements. We solicit comment whether the final rule should include a specific regulatory provision clarifying this issue.

Under proposed paragraph (a)(3), MA plans would be required to use a Pharmacy and Therapeutics (P&T) committee to review and approve step

therapy programs (meaning policies and procedures); we believe that this is necessary to ensure medically appropriate implementation of step therapy for Part B drugs. We believe the burden of this requirement would be limited because we are proposing to allow MA-PD plans to utilize any existing Part D P&T committees established by the MA-PD plan to comply with part 423 requirements for the Part D benefit and to allow MA-only plans to use existing P&T committees when there is a Part D or MA-PD plan under the same contract. The Paperwork Reduction Act listing for P&T committee record keeping is OMB Control Number 0938-0964. We note that P&T committee decisions are not public information. The introductory text of proposed paragraph (b) provides that a MA organization must establish or utilize an existing P&T committee prior to implementation of a step therapy program. The P&T committee would review step therapy programs under our proposal. We are actively considering expanding the role of MA P&T committees and are therefore soliciting comments on our proposal that MA plans with step therapy programs would be required to have P&T committees, and in addition whether the requirement for this MA P&T committee should be expanded to all MA plans that have any utilization management policy (such as prior authorization or dosage limits) applicable to Part B drugs, and whether there are other options that would meet the policy goal of ensuring that step therapy programs are medically appropriate underlying the P&T committee proposal. We propose to codify P&T committee requirements for MA plans in § 422.136(b).

Our proposal for the P&T committee mirrors the Part D requirements for such committees currently codified at § 423.120(b) with regard to membership, scope, and responsibilities. We believe existing Part D P&T requirements at §  423.120(b) are adequate to ensure MA plans implement step therapy for Part B drugs that is medically appropriate. We note that if necessary we may release subregulatory guidance concerning application of the P&T committee requirements in the context of Part B drugs.

The proposed requirements in § 422.136(b) are consistent with Part D requirements for a P&T committee. Specifically, we propose that the majority of members comprising the P&T committee would be required to be practicing physicians and/or practicing pharmacists. The committee would be required to include at least one practicing physician member and at least one practicing pharmacist; these specific individuals would be required to be independent and free of conflict with the MA organization, the MA organization's plans, and the pharmaceutical manufacturers. In addition, the plan would be required to include at least one practicing physician member and one practicing pharmacist who are experts in the care of elderly and disabled persons. We also encourage MA plans to select P&T committee members representing various clinical specialties (for example, geriatrics, behavioral health) to ensure that all conditions are adequately considered in the development of step therapy programs. We are proposing to include provisions for the responsibilities and scope of the P&T Committee at proposed § 422.136(b)(4) through (11) that mirror the current regulation text applicable to Part D P&T Committees under § 423.120(b)(1)(iv) through (xi), with minor revisions to tailor proposed § 422.136(b) to the Part B drug step therapy programs offered by MA plans. These proposed provisions include requirements applicable to P&T committee membership, to the standards and considerations used in reviewing step therapy programs and to documenting its reviews. We reiterate here that we are proposing to substantially align the requirements of a P&T committee reviewing Part B drugs with Part D requirements because CMS has found that Part D requirements for administrative efficiency between the Part C and Part D programs and because the Part D requirements have proved sufficient in ensuring that plans implement medically appropriate step therapy and utilization management protocols in Part D.

Under § 422.136(a)(1) of the proposed rule, step therapy would not be permitted to disrupt enrollees' ongoing Part B drug therapies. We are proposing that step therapy only be applied to new prescriptions or administrations of Part B drugs for enrollees who are not actively receiving the affected medication. MA plans would be required to have a look-back period of 108 days, consistent with Part D policy with respect to transition requirements for new prescriptions, to determine if the enrollee is actively taking a Part B medication. The Part D look back period was created with clinical and pharmaceutical input and CMS believes the same criteria is appropriate for Part B drugs. Further, when an enrollee elects a new MA plan (regardless of whether previously enrolled in a MA plan, traditional Medicare, or new to Medicare), our proposal would require the MA plan to determine whether the enrollee has taken the Part B drug (that would otherwise be subject to step therapy) within the past 108 days. We propose this time period to align with applicable Part D subregulatory guidance on this topic. If the enrollee is actively taking the Part B drug, such enrollee would be exempted from the plan's step therapy requirement concerning that drug. Under our proposal, we would allow MA plans flexibility in implementing step therapy for Part B drugs within specific parameters. Specifically, MA plans would be able to ensure that an enrollee who is newly diagnosed with a particular condition would begin treatment with a cost-effective biological product approved under section 351(k) of the Public Health Service Act or generic medication before progressing to a more costly drug therapy if the initial treatment is ineffective or if there are adverse effects. While proposed § 422.136 does not specifically address the standard for exemptions or movement within a step therapy program, we rely on the MA plan's responsibility to provide all medically necessary covered services and items under the original Medicare program as meaning that cases raising ineffectiveness or adverse effects of treatment as being sufficient basis to grant an exemption or move an enrollee to a higher step in the protocol. However, we propose limits on flexibility in paragraphs (c) and (d).

Consistent with existing Part D guidelines, at § 422.136(c) we are proposing to permit MA plans to require an enrollee to try and fail an off-label medically-accepted indication (that is, an indication supported by one or more citations in the statutory compendia) before providing access to a drug for an FDA-approved indication (on-label indication). Using off-label drugs in step therapy would only be permitted in cases where the off-label indication is supported by widely used treatment guidelines or clinical literature that CMS considers best practices. We are soliciting comments on our proposal to permit MA plans to use off-label drugs only when such drugs are supported by widely used treatment guidelines or clinical literature that CMS considers to represent best practices in a step therapy program.

Additionally, we propose to prohibit an MA organization from using a non-covered drug as a step in the step therapy program (that is, as a condition to coverage). Each step in a step therapy program should be another drug covered under Part B by the MA plan or Part D

by the MA-PD plan to ensure that step therapy programs are not, intentionally or unintentionally, barriers to services that must be covered by the MA plan pursuant to section 1852 of the Act. Therefore, at § 422.136(d) we clarify that only Medicare covered Part B (and for MA-PD plans, Part D drugs) may be used in a step therapy program. In addition to requiring one Part B drug be used before a different Part B drug, MA plans that also offer prescription drug coverage (also known as “MA-PD plans”) may use step therapy to require a Part D drug therapy prior to allowing a Part B drug therapy because the Part D drug would be covered by the plan. MA-PD plans may also apply step therapy to require a Part B drug therapy prior to allowing a Part D drug therapy as part of a Part D step therapy program or utilization management program; however, MA-PD plans must ensure that these requirements are clearly outlined in the Part D prior authorization criteria for the affected Part D drugs and are otherwise consistent with Part D requirements. Additionally, as noted section II.A.2 of this proposed rule (Broader Use of Prior Authorization for Protected Class Drugs), the August 2018 HPMS memorandum entitled, “Prior Authorization and Step Therapy for Part B Drugs in Medicare Advantage” and section II.F (this proposal, Medicare Advantage and Step Therapy for Part B Drugs) would allow MA-PD plans to require step therapy of a Part B drug before a Part D drug. If both proposals II.A.2 and II.F are finalized, the result would be to allow MA-PD plans, starting in 2020, to require step therapy of Part B drugs before Part D drugs for the protected classes as well. Again, as is required for all other drug categories and classes, these particular step therapy requirements would be subject to CMS review and approval, as part of our annual formulary review and approval process, which includes formulary tier review, and relative to prior authorization and step therapy, restricted access, step therapy criteria, prior authorization outlier, and prior authorization criteria reviews.

Section 1852(g)(1) of the Act prescribes that MA organizations must have a procedure for making determinations regarding whether an enrollee is entitled to receive a health service under the MA program and the amount (if any) that the enrollee is required to pay with respect to such service. Such procedures must provide for organization determinations to be made on a timely basis, as required by section 1852(g)(3) of the Act, which prescribes what constitutes timely notice to an enrollee of an expedited organization determination and reconsideration. With respect to expedited organization determinations and reconsiderations, the MA organization must notify the enrollee (and the physician involved, as appropriate) of the decision under time limitations established by the Secretary, but no later than 72 hours from the receipt of the request for the organization determination or reconsideration (or receipt of the information necessary to make the decision) or such longer period as the Secretary may permit in specified cases. For standard reconsiderations, section 1852(g)(2) of the Act states that a reconsideration shall be within a time period specified by the Secretary but shall be made (subject to the expedited provision in section 1852(g)(3)) no later than 60 days after the date the reconsideration request is received.

We are proposing that requests for Part B drugs, including Part B drugs subject to step therapy, be processed under the same adjudication timeframes as used in the Part D drug program, such as in § 423.568(b). While the proposed timeframes for processing organization determinations and appeals for Part B drugs are a departure from the current adjudication timeframes that apply to organization determinations and appeals for medical items and services under the MA program, we believe the clinical circumstances that typically accompany requests for Part B drugs warrant application of the shorter adjudication timeframes that apply in Part D. In keeping with this rationale, we are not proposing that the adjudication timeframes for Part B drugs could be extended, as is allowed for other Part B organization determinations and appeals. This proposed approach not only creates greater consistency in how requests for drugs are handled throughout the initial coverage decision and appeals processes under Part B and Part D, but we believe that adopting the Part D adjudication timeframes for Part B drugs would allow MA-PD plans to better coordinate their drug benefits, specifically in cases where there is uncertainty about coverage under Part B or Part D. These proposed changes would affect the adjudication timeframes through the Part C IRE level of review. We are not proposing to change how Part C appeals, whether for Part A, Part B or supplemental benefits, are processed by the Office of Medicare Hearings and Appeals (OMHA) and the Medicare Appeals Council (Council) which is housed within the Departmental Appeals Board (DAB).

The rules related to organization determinations and appeals under Part 422, subpart M apply to all benefits an enrollee is entitled to receive under an MA plan, including basic benefits as described under § 422.100(c)(1) and mandatory and optional supplemental benefits as described under § 422.102, and the amount, if any, that the enrollee is required to pay for covered benefits. A request for covered medical items or services (including Part B drugs) is currently adjudicated under the timeframes set forth at §§ 422.568, 422.572, and 422.590, with specific requirements related to expediting determinations at §§ 422.570 and 422.584. Requirements for effectuating standard and expedited reconsidered determinations (that is, reversals by the MA organization itself, the independent review entity, or other adjudicator on appeal of an initial denial of coverage), are identified in §§ 422.618 and 422.619.

We are proposing to do all of the following:

• Add adjudication timeframes at §§ 422.568, 422.572(a), and 422.590(c) and (e)(2) for, respectively, standard organization determinations, expedited organization determinations, standard reconsiderations, and expedited reconsiderations related to coverage of Part B drugs that are the same as the timeframes for these appeal stages for Part D drugs under §§ 423.568, 423.572, and 423.590.

• Add references to determinations regarding Part B drugs to §§ 422.568(d) and (e)(4), 422.584(d), 422. 618(a) and (b), and 422.619(a), (b) and (c).

• Specify in §§ 422.568(b)(2), 422.572(a), and 422.590(c) and (e)(2) that the rules related to extending the adjudication timeframe related to requests for medical services and items (at §§ 422.568(b)(1)(i), 422.572(b) and redesignated § 422.590(f)) do not apply to the timeframes for resolving standard organization determinations, expedited organization determinations, standard reconsiderations, and expedited reconsiderations for Part B drugs.

• Make conforming changes that reference the applicable proposed timeframes and deadlines for determinations regarding Part B drugs and update cross-references in §§ 422.570(d)(1), 422.584(d)(1), and 422.618(a).

• Add a reference to an “item” to regulation text to clarify that the scope covers services and items at §§ 422.568(b), (d), and (e); 422.572(a) and (b), 422.590(a), (e), and (f); and 422.619(a) and (b).

• Redesignate existing regulatory paragraphs at § 422.568(b)(1) and (2) to § 422.568(b)(1)(i) and (ii), at § 422.590(c)-(f) to § 422.590(d)-(f), and at § 422.619(c)(2) to § 422.619(c)(3), without substantive change.

We discuss our proposal in more detail later in this section.

Under the regulations at § 422.572(a), an MA organization must notify an enrollee (and the physician involved, as appropriate) of an expedited organization determination as expeditiously as the enrollee's health requires, but no later than 72 hours after receiving the request. For expedited organization determination requests for a Part B drug, we are proposing at new paragraph (a)(2) of § 422.572 that an MA organization must make its determination and notify the enrollee (and the physician or prescriber involved, as appropriate) of its decision no later than 24 hours after receipt of the request. This proposed 24-hour timeframe for expedited organization determinations involving a Part B drug is permissible by statute, as section 1852 (g)(3)(B)(iii) of the Act requires that the enrollee be notified of an expedited decision under time limitations established by the Secretary, but not later than 72 hours from the time the request is received. With respect to pre-service standard organization determinations, the regulations at § 422.568(b) state that the MA organization must notify the enrollee of its decision as expeditiously as the enrollee's health condition requires, but no later than 14 calendar days after the MA organization receives the request for a standard determination. For consistency with the timeframe for standard Part D coverage determinations, we are proposing at § 422.568(b)(2) that, for a request for a Part B drug, an MA organization must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination no later than 72 hours after receipt of the request. Section 422.568(b)(1) relates to standard requests for services and sets forth the existing timeframe of 14 calendar days, while proposed new paragraph (b)(2) would establish the 72-hour timeframe for standard organization determination requests for Part B drugs. We are proposing to redesignate existing paragraphs (b)(1) and (b)(2) with respect to extensions and notice of extensions for requests for service to § 422.568(b)(1)(i) and (ii), respectively. We are also proposing corresponding changes to § 422.568(d) and (e)(4) related to notice requirements to specifically reference Part B drug requests, to distinguish these requests from requests for medical services.

In all circumstances, the MA organization must notify the enrollee, and the physician or other prescriber involved, as appropriate of its decision as expeditiously as the enrollee's health condition requires, but no later than the proposed timeframes of 24 hours for expedited organization determination requests and 72 hours for standard organization determination requests for a Part B drug. As noted previously, we believe the nature of drug benefits supports shorter adjudication timeframes so enrollees have timely access to necessary prescription drugs. To that end, we are not proposing to permit MA organizations to extend the proposed timeframes for requests for Part B drugs under current rules at §§ 422.568(b)(1) and 422.572(b), and are proposing specific prohibitions on such extensions for Part B drugs in new text at §§ 422.568(b)(1), 422.572(b), and 422.590(c) and (e). Extending adjudication timeframes is not permitted under the Part D program and we do not believe extensions are warranted in the case of a request for a Part B drug due to the clinical circumstances typically involved in a request for a drug. The overall goal of these proposals is to ensure that MA enrollees have timely access to Part B drugs and to establish more consistency in the adjudication timeframes applicable to requests for Medicare drug benefits. At proposed §§ 422.568(b)(1)(i), 422.572(b), and redesignated § 422.590(f), we are specifying that the rules related to extending the adjudication timeframe relate to requests for medical services and items, but not requests for Part B drugs.

We recognize that there may be circumstances under which an enrollee would not be able to satisfy a Part B drug step therapy requirement due to the enrollee's medical condition and believe these issues can be resolved under the organization determination process. Further, under current regulation at § 422.111, MA organizations must disclose to enrollees the benefits under a plan, including applicable conditions and limitations, premiums and cost-sharing (such as copayments, deductibles, and coinsurance) and any other conditions associated with receipt or use of benefits. Therefore, MA organizations must disclose prior authorization rules and other review requirements (for example, step therapy) that condition or limit coverage and must be met in order to ensure payment for services. In addition, the rules at § 422.112 require MA organizations to have policies and procedures (coverage rules, practice guidelines, payment policies, and utilization management) that allow for individual medical necessity determinations. We believe the rules on disclosure of utilization management requirements and individualized medical necessity determinations, coupled with the right to request an organization determination, ensure that an enrollee is informed about applicable step therapy requirements and has an opportunity for an individualized medical necessity determination related to a Part B drug step therapy requirement. An MA plan can determine through the organization determination process that a particular enrollee should be exempted from step therapy requirements for reasons of medical necessity; as with other organization determinations under existing regulations, the enrollee would be notified that he/she has been determined eligible for such exemption. Although not required under our proposal, an MA organization may establish an evaluation process for the appropriateness of enforcing its step therapy protocols on an enrollee when the enrollee's healthcare provider's assessment of medical necessity for the Part B drug indicates that the lower or earlier steps in the step therapy protocol are not clinically appropriate for that enrollee (such as in cases of allergy or a prior unsuccessful use of the preferred drug). MA organizations may work with their network providers to develop processes that eliminate the necessity for an enrollee to file a request for an organization determination in such cases. We are not proposing to require such additional policies or processes but we are similarly not prohibiting them.

At § 422.590, we are proposing at redesignated paragraph (e)(2) that if an MA organization approves a request for an expedited reconsideration, it must complete its reconsideration and give the enrollee and the physician or other prescriber involved, as appropriate notice of its decision as expeditiously as the enrollee's health condition requires but no later than 72 hours after receiving the request. At redesignated paragraph (e)(3), we are proposing to add the term “orally” to existing regulation text to clarify that if the MA organization first notifies an enrollee of a completely favorable expedited reconsideration orally, it must also mail written confirmation to the enrollee within 3 calendar days.

With respect to the independent review entity (IRE) level of review, the current contract with the Part C IRE

requires enrollees to be notified of an expedited reconsideration decision no later than 72 hours from the IRE's receipt of the case. This 72-hour timeframe is consistent with the current adjudication timeframe for expedited Part D IRE reconsiderations. If this proposal is finalized, we would modify our contract with the Part C IRE to require that enrollees be notified of a standard reconsideration related to a Part B drug no later than 7 calendar days from receipt of the case.

We are proposing a conforming change to § 422.584(d)(1) to reference the proposed 7-day timeframe for standard Part B drug requests at § 422.590(c). If a MA organization denies a request for expedited reconsideration of a Part B drug, it must automatically transfer the request to the standard timeframe and make the determination within the 7 calendar day timeframe in proposed § 422.590(c). The timeframe begins the day the MA organization receives the request for expedited reconsideration.

We are also proposing conforming changes at § 422.570(d). At paragraph (d), with respect to actions following a denial of a request for an expedited determination, we are proposing to add a reference to the proposed 72-hour timeframe for standard Part B drug requests to existing text that specifies automatic transfer to the 14-calendar day timeframe for standard determinations regarding services. So, if an MA organization denies a request for an expedited determination, it must automatically transfer a request to the standard timeframe and make the determination within the proposed 72-hour timeframe at § 422.568(b)(2) for standard determinations regarding Part B drugs. The timeframe begins when the MA organization receives the request for expedited determination.

As a corollary to the proposed changes to the adjudication timeframes, we are proposing changes to the effectuation timeframes at §§ 422.618 and 422.619. As with the proposals related to the adjudication timeframes, the proposed changes to the effectuation timeframes are intended to ensure that MA organization enrollees receive necessary Part B drugs in a timely manner and are consistent with the Part D timeframes. Specifically, we are proposing a new § 422.618(a)(3) to state that if, on a standard reconsideration of a request for a Part B drug, the MA organization reverses its organization determination, the MA organization must authorize or provide the Part B drug under dispute as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days after the date the MA organization receives the request for reconsideration. We are also proposing a new § 422.618(b)(3) to state that if, on a standard reconsideration of a request for a Part B drug, the MA organization's determination is reversed in whole or in part by the independent outside entity, the MA organization must authorize or provide the Part B drug under dispute within 72 hours from the date it receives notice reversing the determination and, further, that the MA organization must inform the independent outside entity that the organization has effectuated the decision.

We are proposing to add § 422.619(a)(1) and (2) whereby paragraph (a)(1) would include the existing regulation text at § 422.619(a) related to reversals by the MA organization for expedited requests for a service. Proposed paragraph (a)(2) of § 422.619 would account for reversals by the MA organization for expedited reconsideration requests for a Part B drug. We are proposing that paragraph (a)(2) state that if the MA organization reverses its organization determination on an expedited reconsideration request for a Part B drug, the MA organization must authorize or provide the Part B drug under dispute as expeditiously as the enrollee's health condition requires, but no later than 72 hours after the date the MA organization receives the request for reconsideration. At § 422.619, we are proposing to add paragraphs (b)(1) and (2). Proposed § 422.619(b)(1) would include the existing regulation text at § 422.619(b) related to reversals by the independent outside entity for expedited reconsideration requests for a service and proposed § 422.619(b)(2) would account for reversals by the independent outside entity for expedited reconsideration requests for a Part B drug. We are proposing that paragraph (b)(2) state that if, on expedited reconsideration, the MA organization's determination is reversed in whole or in part by the independent outside entity, the MA organization must authorize or provide the Part B drug under dispute as expeditiously as the enrollee's health condition requires but no later than 24 hours from the date it receives notice reversing the determination. The MA organization must inform the outside entity that the organization has effectuated the decision. At § 422.619(c)(2) we are proposing to redesignate paragraph (c)(2) as new paragraph (c)(3) and propose that new paragraph (c)(2) address reversals of decisions related to Part B drugs by other than the MA organization or the independent outside entity. Specifically, we are proposing that paragraph (c)(2) state that if the independent outside entity's expedited determination is reversed in whole or in part by an ALJ/attorney adjudicator or at a higher level of appeal, the MA organization must authorize or provide the Part B drug under dispute as expeditiously as the enrollee's health condition requires but no later than 24 hours from the date it receives notice reversing the det

This text is long and has been trimmed here. Open the source document for the complete record.