In Executive Order, Biden Directs CMMI to Tackle Drug Costs

In an executive order released Oct. 14, the Biden administration directed the CMS Center for Medicare and Medicaid Innovation (CMMI) “to consider additional actions to further drive down prescription drug costs,” building on the Medicare drug price negotiation stipulations of the Inflation Reduction Act (IRA). D.C. insiders tell AIS Health, a division of MMIT, that CMMI could pull old policy proposals off the shelf when it works to “test new ways of paying for Medicare services that improve the quality of care while lowering costs,” as the administration puts it.

The executive order isn’t specific about what policies the White House would prefer CMMI look into. However, the administration will know the possibilities fairly soon: CMMI will have 90 days to develop recommendations. Per a White House fact sheet, the final product will be “a formal report outlining any plans to use the Innovation Center’s authorities to lower drug costs and promote access to innovative drug therapies for Medicare beneficiaries.”

D.C. insiders say that language suggests that specialty drug pricing and supply chain issues could be part of the final recommendations. So could further action on out-of-pocket spending for seniors — although the IRA limits Medicare beneficiaries’ OOP spending to $2,000 per year going forward, one expert suggests that CMMI might find ways to tinker with out-of-pocket costs on specific drugs. (The IRA also caps seniors’ OOP spending on insulin at $35 per month.)

“This is really looking to build on the IRA, which, to a certain extent, lowers prices,” Brenna Raines, director at ADVI Health, tells AIS Health. “But the other large portion of the IRA is more directed at lowering CMS’s expenditures on drugs and not as much on lowering out-of-pocket costs for beneficiaries.”

Raines observes “that autoimmune, multiple sclerosis, and oncology patients have high OOP costs.” She suggests that a 2021 slide deck on OOP costs prepared by Pharmaceutical Research and Manufacturers of America (PhRMA), the leading drug company trade group, could offer hints about likely categories for OOP changes.

IRA’s Insulin Caps Could Be a Model for New Programs

Along those lines, Raines says that the IRA’s insulin cost sharing caps may be a model for other drugs.

“That insulin provision actually mimics one of CMMI’s models, the Part D Senior Savings Model,” Raines explains. “So one of the things that we might expect to see come 2023, when these models are due [for release] is a similar model rolled out for maybe other drug classes.”

Raines adds that for out-of-pocket costs to be reduced, “the costs have to be picked up somewhere. The three big buckets that we would look to would be the plans, the manufacturers of these drugs, or ultimately the taxpayers” through a higher Medicare budget.

PBMs Could Be a ‘Target’ of CMMI

“Whoever the stakeholder being targeted is, that is going to bear the cost of the model, will be resistant,” Raines predicts. “I think pharmacy benefit managers were one of the players that were significantly ignored in the Inflation Reduction Act. So it is possible that we will see something there, with maybe passing through rebates directly to beneficiaries — something like that.”

James Gelfand, president of the ERISA Industry Committee (ERIC), also says PBMs could be in the crosshairs of the CMMI demonstration.

The administration could “potentially change incentives within the system,” Gelfand tells AIS Health. “Whether incentives change for a hospital, for a PBM, for a Medicare Advantage plan — there’s lots of different avenues that they [CMMI] could go down.”

Programs Could Impact Commercial Market

Gelfand adds that he will follow the CMMI recommendations closely, even though ERIC represents employer plan sponsors and doesn’t work on Medicare policy.

“If this stuff works — if there’s a successful demonstration on this stuff — the employers will be the first ones to say, ‘We need to be doing this, too,’ and call upon their vendors, like insurance companies and PBMs” to do the same thing, he explains. “When the hospital’s getting used to something that they have to do for Medicare, they’re more likely to be accepting of it from the private sector, similar to how accountable care organizations have evolved.”

“CMMI has the ability to do all kinds of interesting things,” Gelfand adds. “When we think about the executive order’s focus on them, and essentially saying, ‘What can I do in terms of these demonstrations to really ensure that people are paying less for drugs, and taxpayers are sharing in some of these savings’ — many of the things they may try could translate really well into the private sector. Some of the things that they might end up experimenting with — a lot of that is stuff that we’re interested in.”

Specialty Drugs Could Be a Focus

Gelfand says that specialty drugs are one area where he thinks changes to Medicare’s operations could benefit employer plan sponsors, arguing that providers and manufacturers have incentives to administer infusion drugs in inpatient settings.

“Chemo, dialysis — plenty of services that traditionally you have to go spend your whole day at the hospital for have transformed into things where you can take a couple of hours and go somewhere much closer, convenient and cheap,” Gelfand says.

Some sort of specialty drug model “is not outside the realm of possibilities,” Raines says. “In the past, there have been proposals to reform how Part B drugs are paid for.”

Gelfand is also watching for a comprehensive medication management program in Medicare and improved care coordination for drug prescribing.

“There’s a major, major issue related to how reimbursement works for drugs that are given in the hospital,” he says. “It causes all kinds of distortions, not just in the supply chain.…Misaligned incentives are pervasive throughout the system.”

To predict the direction CMMI might take, Raines says that it’s worth reviewing models that have already ended.

“CMMI has had a number of proposals over the year that have never gone anywhere,” Raines says, while others “have taken off. I wouldn’t be surprised if we see either ideas reintroduced or ones that appear new to us but have been in the works for some time.”

Contact Gelfand at jgelfand@eric.org and Raines via Isabella Paladino at isabella.paladino@finnpartners.com.

This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

© 2024 MMIT
Peter Johnson

Peter Johnson

Peter has worked as a journalist since 2011 and has covered health care since 2020. At AIS Health, Peter covers trends in finance, business and policy that affect the health insurance and pharma sectors. For Health Plan Weekly, he covers all aspects of the U.S. health insurance sector, including employer-sponsored insurance, Medicaid managed care, Medicare Advantage and the Affordable Care Act individual marketplaces. In Radar on Drug Benefits, Peter covers the operations of (and conflicts between) pharmacy benefit managers and pharmaceutical manufacturers, with a particular focus on pricing dynamics and market access. Before joining AIS Health, Peter covered transportation, public safety and local government for various outlets in Seattle, his hometown and current place of residence. He graduated with a B.A. from Colby College.

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