Medicare Part D

There wasn’t much to be gleaned from CMS’s latest annual report on program audits of Medicare Advantage and Part D sponsors, and CMS wants it that way. According to the 2022 Part C and Part D Program Audit and Enforcement Report, published on July 18, just three MA insurers received a civil monetary penalty as the result of a program audit last year, with the average CMP around $21,000 — compared with an average of $65,247 in 2021 and $200,000 in 2019. CMS in the report said the amount of the CMP “does not automatically reflect the overall performance of a sponsor” and, similar to last year, warned against reaching “broad conclusions about the significance of deficiencies or performance across” the MA, Part D or Medicare-Medicaid Plan (MMP) programs.

Two congressional committees advanced notable PBM legislation, moving one step closer toward comprehensive changes to PBMs’ dominant business mode.

The Senate Finance Committee, with a near-unanimous bipartisan majority, advanced a major Medicare- and Medicaid-focused PBM reform bill on July 26l. D.C. insiders tell AIS Health, a division of MMIT, that the committee’s move bodes well for notable commercial market PBM reforms. So does the fact that senators of both parties are emphatically in favor of it, despite reluctance by some Republican members of the House of Representatives to make aggressive changes to PBM regulations.

With the Inflation Reduction Act (IRA) implemented in a relatively short time frame, many uncertainties remain, including the type of information CMS will deem most useful in drug price negotiations and how the law will impact biosimilars. During a June 20 webinar on navigating the IRA, Mark McClellan, M.D., Ph.D., the Robert J. Margolis Professor of Business, Medicine, and Policy, and founding director of the Duke-Margolis Center for Health Policy at Duke University, addressed some of those issues and how he expects them to play out. McClellan, who served as FDA commissioner from 2002 through 2004 and CMS administrator from 2004 through 2006, also offered advice on what he thinks pharma manufacturers should do as the first steps of price negotiation loom.

The event was presented by Innopiphany and moderated by Lisa Kennedy, Ph.D., managing principal at the life sciences consulting company.

CVS Health Co.’s Caremark PBM struck a deal with GoodRx, Inc. that will allow eligible Caremark members to automatically access to GoodRx's prescription pricing at the pharmacy counter, which may lower their out-of-pocket costs for generic medications, per a July 12 press release. Using GoodRx coupons won’t affect members’ deductible and out-of-pocket threshold calculations, CVS added, noting that “plan members only need to utilize their existing benefit card at their preferred in-network pharmacy” to access the new discounts. “Through this program, patients don't have to choose between using their pharmacy benefit or using GoodRx to save on their prescriptions — now they can do both right at the counter so they have confidence they are always paying the lowest available price, said Scott Wagner, interim CEO of GoodRx. “This collaboration can make a meaningful difference for the tens of millions of Americans that CVS Caremark serves." The pact isn’t GoodRx’s first deal with a “big three” PBM — GoodRx also has a similar discount arrangement with The Cigna Group’s Express Scripts.

Although several PBM reform measures are already circulating in Congress, lawmakers recently added even more legislative proposals to the fray. The Senate Finance Committee released a discussion draft that would introduce a host of financial reporting requirements for PBMs contracted by Medicare Part D plans, and then announced it would mark up a package including that measure and other PBM reforms later this month. And, following a markup, the House Education and Workforce Committee advanced a spate of bills focused on promoting transparency for PBMs, health care providers and insurers.

A Capitol Hill insider tells AIS Health, a division of MMIT, that how exactly these measures will fit into a final package of PBM reform legislation remains to be seen, although a few possible scenarios are beginning to come into view.

Upcoming changes in the Medicare Part D benefit that involve increasing the risk borne by insurers in the catastrophic phase may boost pressure on plans to control costs in the six protected classes, and manufacturers are worried about what that might lead to.

Under the Inflation Reduction Act (IRA), Part D plan obligations for drug costs will increase from 15% to 60% in the catastrophic phase beginning in 2025, while Medicare’s will decrease from 80% to 20% for brands.

Manufacturers will supplement coverage in the catastrophic phase with a new 20% mandatory discount on brands but plans are still expected to look for ways to lower drug spending because they won’t be able shift costs to enrollees in the usual ways. As part of the redesign, cost sharing will be capped at $2,000 a year and annual premium increases will be limited.

The Senate Finance Committee recently introduced a bill that adds to a growing swell of legislation aimed at changing how PBMs conduct business. This latest measure, which is focused solely on Medicare Part D, aims to delink PBM compensation from drug list prices and utilization. Industry experts say it is meant to complement, rather than compete with, other legislation that targets a broader range of business practices and insurance markets.

The Patients Before Middlemen (PBM) Act, introduced on June 14, targets just Medicare Part D because that program is where the Senate Finance Committee’s jurisdiction lies, explains James Gelfand, president and CEO of the ERISA Industry Committee (ERIC). And based on the Senate Health, Education, Labor and Pensions (HELP) Committee’s jurisdiction, the legislation that it advanced in May — the Pharmacy Benefit Manager Reform Act — would apply just to employer-based health plans and address issues such as rebate retention and spread pricing.

As Medicare Advantage organizations prepare for the next bid cycle, each year seems to bring its own set of factors that threaten their ability to stay competitive amid potential cost increases. For the 2023 plan year, the expiration of COVID-related adjustments and expected decline in quality bonus payments had plans considering modest benefit enhancements. For the 2024 plan year, maintaining stable benefits and premiums amid anticipated rate cuts and uncertainty around Medicare Part D trends is the name of the game, according to actuaries who helped plans submit bids that were due on June 5.

After proposing substantial revisions to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model that insurers argued would result in rate reductions, CMS on April 3 opted to phase in the changes starting with 2024. CMS at the time estimated that plans would, on average, see a 3.32% increase in risk adjusted revenue, although that will vary broadly by plan. CMS also estimated the combined impact of the risk model revision and fee-for-service normalization could reduce payments by 2.16%. However, given that the agency will apply a blended method to calculate risk scores next year, plans could see a 4.44% overall risk score trend.

Shortly after the city of New York inked a deal with CVS Health Corp.-owned Aetna to administer a PPO plan to some 250,000 retirees and their eligible dependents, a group of former city employees are suing to block Mayor Eric Adams (D) from transitioning their retiree health care coverage away from fee-for-service (FFS) Medicare. According to news reports, the class action lawsuit was filed in the state Supreme Court on May 31 by nine individual municipal retirees and the NYC Organization of Public Service Retirees, which sued to block the implementation of a previous contract with Elevance Health, Inc. (then Anthem). The original transition was supposed to begin on April 1, 2022, but the city revised its plans after a state Supreme Court judge ruled that the proposal violated city law by requiring retirees who opted out of the switch to pay $191 per month to maintain their FFS coverage. That July, Elevance backed out of the deal. In the “final approved plans, retirees who opt out of the city’s coverage will have to pay for any supplemental coverage on their own,” reports Becker’s Payer Issues. The plaintiffs alleged that the option to switch to FFS with Medicare Supplemental Insurance is cost prohibitive and that the new coverage offering constitutes nothing more than a “bait and switch,” according to Crain’s New York Business. The $15 billion pact with Aetna is expected to save the city $600 million a year.

From CMS’s expanded definition of primarily health-related supplemental benefits to the introduction of Special Supplemental Benefits for the Chronically Ill (SSBCI), Medicare Advantage plans have gained increasing flexibility over the last few years to offer supplemental benefits that can address social needs. Through the ongoing MA Value-Based Insurance Design (VBID) model — the only MA-focused demonstration being tested by the CMS Innovation Center — MA organizations have even more flexibility to target and tailor a variety of interventions. During a recent virtual panel of the Fourth National Medicare Advantage Summit, several longtime participants of the model agreed that such flexibility is critical to meeting beneficiaries’ evolving health-related and other social needs.

CMS first tested the model on a limited basis in 2017, allowing sponsors to offer reduced cost sharing for medications and offer high-value services to beneficiaries with select chronic conditions. Today, the model allows MAOs to tailor their MA plan offerings using several approaches and has 52 MAOs offering services to an estimated 6 million enrollees.