Perspectives

Perspectives on Legality of Closed Medicaid Formularies

March 19, 2020

As part of long-awaited guidance that CMS issued to states on Jan. 30 outlining how they can test-drive a fixed federal Medicaid budget and more program flexibilities, the Trump administration invited states to try out something else that hasn’t been done before: implement a closed drug formulary for a portion of their Medicaid population, AIS Health reported.

As part of long-awaited guidance that CMS issued to states on Jan. 30 outlining how they can test-drive a fixed federal Medicaid budget and more program flexibilities, the Trump administration invited states to try out something else that hasn’t been done before: implement a closed drug formulary for a portion of their Medicaid population, AIS Health reported.

“For the first time, participating states will have more negotiating power to manage drug costs by adopting a formulary similar to those provided in the commercial market, with special protections for individuals with HIV and behavioral health conditions,” CMS said in its press release unveiling the Healthy Adult Opportunity demonstration, which states can apply for via a Section 1115 Medicaid waiver.

Currently, states’ Medicaid programs must cover all FDA-approved drugs, as mandated by federal law. But CMS is suggesting that states can waive that requirement for the population they choose to cover under their demonstration — likely people who are covered by Medicaid expansion — and still participate in the Medicaid Drug Rebate Program.

But some industry experts tell AIS Health they’re not sure whether that will be legally permissible.

“I have my doubts as to whether this will bear legal scrutiny because it goes against the entire Medicaid Drug Rebate Program, which is rebates in exchange for open formularies,” says Jeff Myers, the former CEO of Medicaid Health Plans of America and founder of health care consulting firm OptDis.

Indeed, “the legal side is obviously the giant question with the whole Healthy Adult Opportunity program,” Jason Karcher, an actuary with Milliman, Inc., tells AIS Health. “We just don’t know how the courts will ultimately see this, although I think it would be fair to be skeptical that we’ll actually get to see a waiver under this [guidance] make it in the near future.”

Perspectives on ACA Exchange Draft Regulation

March 5, 2020

On Jan. 31, CMS released the 2021 Notice of Benefit and Payment Parameters (NBPP), which is the annual omnibus regulation that outlines the rules of the game for Affordable Care Act (ACA) exchange plans. But that was only after a trade group for safety-net health plans sent a strongly worded letter warning the Trump administration that the clock is ticking for issuers to finalize their 2021 premiums and benefit designs.

On Jan. 31, CMS released the 2021 Notice of Benefit and Payment Parameters (NBPP), which is the annual omnibus regulation that outlines the rules of the game for Affordable Care Act (ACA) exchange plans. But that was only after a trade group for safety-net health plans sent a strongly worded letter warning the Trump administration that the clock is ticking for issuers to finalize their 2021 premiums and benefit designs.

In its Jan. 27 letter, the Association for Community Affiliated Plans (ACAP) complained to CMS that the proposed 2021 NBPP “appears to be stalled at the Office of Management and Budget.” (The OMB completed its review of the regulation on Jan. 29.) Insurers need to submit qualified health plan (QHP) applications starting in early May, ACAP pointed out. “Building in a minimum 30-day comment period in addition to 30 days for the Department to review, revise, and release the final [rule] would allow just one month for issuers to operationalize and implement necessary updates,” the group wrote. “This timeframe will not allow issuers sufficient time to prepare products and operations for Benefit Year 2021.”

Fritz Busch, an actuary with Milliman Inc., tells AIS Health that the final NBPP has come out in April during the past two years, but before that arrived much earlier. The delay of the NBPP “presents operational challenges for a lot of plans, because so many plans are right in the middle of doing their pricing and other planning for the year,” he adds.

As for the content of the draft NBPP, the most attention-grabbing proposed changes to the rules surrounding subsidy eligibility. CMS said it’s seeking public comment on “new automatic re-enrollment processes for enrollees whose share of the premium after applying premium subsidies is $0, in order to reduce the risk of incorrect expenditures on subsidies that cannot be recovered through reconciliation.” In addition, “periodic data matching standards would be amended to help ensure premium subsidies are not inappropriately paid to enrollees who are determined to be deceased, or dually eligible for Medicare.”

Perspectives on Part D Reform in 2020

February 20, 2020

If Congress or the Trump administration are able to enact any type of drug-pricing reform during 2020, it’s likely to be a redesign of Medicare Part D, industry experts tell AIS Health.

If Congress or the Trump administration are able to enact any type of drug-pricing reform during 2020, it’s likely to be a redesign of Medicare Part D, industry experts tell AIS Health.

In the Senate, tweaking the Part D benefit is part of a larger piece of bipartisan legislation (S. 2543), championed by Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.). From the House, there’s the sweeping legislation (H.R. 3) proffered by Speaker Nancy Pelosi (D-Calif.).

Both bills would implement out-of-pocket spending caps for Part D beneficiaries and considerably change how costs are divided up in the catastrophic phase of coverage. They would also require drug manufacturers to repay Medicare if certain Part B or Part D drug prices rise faster than inflation.

“If you look at both the House and the Senate bills that have been put forward here, those [Part D] designs look very similar to one another, so I’m somewhat optimistic that…maybe there’s an opportunity for that to move forward,” says Stacie Dusetzina, an associate professor of health policy at the Vanderbilt University School of Medicine.

However, Elizabeth Carpenter at Avalere Health contends that “it is unlikely in this environment that any drug pricing legislation would move as a standalone bill.” The most likely pre-election vehicle for a Part D redesign would be the health care extenders package that expires in May, she adds.

Gerard Anderson, a professor at Johns Hopkins University Bloomberg School of Public Health, is more optimistic. “Drug pricing is the No. 1 issue for most voters when they’re talking about health care,” he points out. “So they’re going to feel a strong pressure” to pass something in Congress. Given that dynamic, he says he expects the Wyden/Grassley bill is likely to pass this year.

In whatever form a Part D redesign passes, Dusetzina says the biggest winner would be patients. While manufacturers and health plans would be on the hook for more spending in the catastrophic coverage phase, “on net, it probably isn’t very harmful for any one entity,” she contends.

Perspectives on Consolidated PBMs in 2020

February 6, 2020

Though the two major transactions that upended the PBM landscape — Cigna Corp. buying Express Scripts Holding Co. and CVS Health Corp. acquiring Aetna Inc. — have already taken place, that doesn’t mean the sector won’t see more changes this year, industry experts tell AIS Health.

Though the two major transactions that upended the PBM landscape — Cigna Corp. buying Express Scripts Holding Co. and CVS Health Corp. acquiring Aetna Inc. — have already taken place, that doesn’t mean the sector won’t see more changes this year, industry experts tell AIS Health.

“The market is evolving,” says Brian Anderson, a principal with Milliman, Inc. The year 2020 will be marked by a presidential election and significant price pressure on manufacturers, along with pharmacies trying to retain their margin, he adds, “so it’s going to be a really wild year.”

Indeed, 2019 ended with Prime Therapeutics LLC and Express Scripts unveiling a three-year collaboration in which the latter PBM will negotiate with pharmaceutical manufacturers, on behalf of Prime’s members, for drugs covered on the pharmacy benefit, as well as provide services related to retail network contracting.

By teaming up with Prime, Express Scripts will be leading rebate negotiations and pharmacy network development for 103 million people, Adam Fein, Ph.D., CEO of Pembroke Consulting, Inc.’s Drug Channels Institute, wrote in a blog post. “This combined volume of Express Scripts and Prime will have enormous leverage with manufacturers and pharmacies,” he noted.

To Ashraf Shehata, KPMG national sector leader for health care and life sciences, the Prime/Express Scripts partnership is yet another example of “pure play” PBMs’ move toward consolidation. Given that trend, the opportunity to scale up both organizations’ purchasing power, and “the ability to kind of lock in Blue clients,” Shehata says, “I think it makes a lot of sense” for the two PBMs to team up.

Employers, meanwhile, are likely to press PBMs of all varieties for innovative solutions — not just deep drug-pricing discounts — during the selling season for 2021 contracts, Anderson says.

Therefore, “there’ll probably be a lot of new innovators in the market — people coming up with new products that maybe look and sound different,” he says. “But the question people are going to have to ask is, how different really is it? And is it really a differentiator in the marketplace?”

Perspectives on MA Supplemental Benefits

January 23, 2020

Despite Medicare Advantage insurers’ enthusiasm for increased flexibility in allowable supplemental benefits and a slew of recent plan press releases touting goodies such as pest control and “Papa Pals” for the 2020 plan year, uptake of more “resource intensive” benefits geared toward seriously ill seniors remains relatively modest, according to a new report from the Duke Margolis Center for Health Policy.

Despite Medicare Advantage insurers’ enthusiasm for increased flexibility in allowable supplemental benefits and a slew of recent plan press releases touting goodies such as pest control and “Papa Pals” for the 2020 plan year, uptake of more “resource intensive” benefits geared toward seriously ill seniors remains relatively modest, according to a new report from the Duke Margolis Center for Health Policy.

The December report, “Improving Serious Illness Care in Medicare Advantage: New Regulatory Flexibility for Supplemental Benefits,” showed that a total of 507 standard MA plans in 2019 offered one of five types of benefits addressing serious illness, accounting for roughly 11% of the approximately 4,500 standard MA plans in 2019, AIS Health reported. By contrast, 377 in 2020 offered at least one of the five benefits highlighted in the report, while no plans in 2019 offered more than one of these benefits. But that drop was mainly driven by one major carrier abandoning its caregiver support benefit for 2020. Meanwhile, about 175 plans offered at least two of these types of these benefits, according to Robert Saunders, research director and one of the report’s authors.

Despite the decrease in caregiver support, which had the greatest initial uptake of the five benefit categories in 2019, researchers saw meaningful increases for 2020 in benefits such as adult day care and palliative care that “more directly address the needs of members with serious illness.”

The study also linked the PBP data to MA enrollment figures by plan and by county to assess the geographic impacts of the policy changes. For 2020, many parts of the country do not have any plans offering new supplemental benefits, and those aimed at serious care were likely to be offered in urban counties, said the report.

Barring any major disruption, 2021 will likely be the year of growth for new flexible benefits, as it takes plans a couple years to price, test and stand up ones that will have a lasting impact, adds Saunders.

Perspectives on UnitedHealth/Diplomat Deal

January 9, 2020

Diplomat Pharmacy, Inc., which has been in a tailspin amid mounting financial losses, agreed to a deal with UnitedHealth Group on Dec. 9 that will see the larger firm’s OptumRx division purchase the midsized specialty pharmacy provider/PBM, AIS Health reported.

Diplomat Pharmacy, Inc., which has been in a tailspin amid mounting financial losses, agreed to a deal with UnitedHealth Group on Dec. 9 that will see the larger firm’s OptumRx division purchase the midsized specialty pharmacy provider/PBM, AIS Health reported.

Diplomat’s difficulties began to come into focus earlier this year, when the firm disclosed customer losses in its PBM business and “increased competitive pressure in the specialty market.” In August, Diplomat said it was “reviewing strategic alternatives” to maximize shareholder value. Then on Dec. 9, UnitedHealth disclosed that it agreed to pay $4 per share for Diplomat’s outstanding stock and assume its debt. Equities analysts noted that Diplomat’s stock was trading at $5.81 as of market close on the Friday before the transaction was unveiled.

Adam Fein, Ph.D., CEO of Pembroke Consulting, Inc.’s Drug Channels Institute, says that “the specialty pharmacy market is reaching maturity, as PBMs and insurers dominate specialty drug dispensing channels.” Diplomat, he says, “was unable to navigate the industry’s evolution.”

“Diplomat’s sale at a bargain basement price signals that the shakeout is underway,” Fein adds. “Fewer new specialty pharmacies are starting up, the bigger companies are getting acquired, and market share is concentrating further with the biggest players.”

Ashraf Shehata, KPMG’s national sector leader for health care and life sciences, says that the purchase of Diplomat comes as the rivalry is intensifying between UnitedHealth and its two big consolidated rivals, CVS Health Corp. and Cigna Corp.

Now that those companies have completed major transactions to assemble their assets — with CVS buying health insurer Aetna and Cigna acquiring the PBM Express Scripts — “we’re kind of seeing what I call the second phase right now of the competition really heating up between the big players,” he says.

Growth continues to be the “name of the game” for those three companies, Shehata says, but it’s difficult to come by in an industry that’s already so consolidated. Because of that, “now you might see some growth on the edges” in the same vein as the UnitedHealth/Diplomat deal, he adds.