As a cost-saving strategy, CMS will allow Part D sponsors to use indication-based formulary design in 2020.

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Sept. 7, 2018


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Coming Soon to a Part D Plan Near You: Indication-Based Formulary Design


Late last week, the Centers for Medicare & Medicaid Services (CMS) informed Medicare Part D plan sponsors that, as of January 1, 2020, it is planning to allow them to use indication-based formulary design as a strategy to lower drug costs. The agency hopes the additional flexibility will increase access, promote formulary diversity, and lead to better negotiation tactics for seniors and government programs. This follows what is being done in the private sector; private health plans have already implemented indication-based formulary designs that tailor on-formulary drug coverage predicated on specific indications.

Currently, Part D sponsors must cover any drug on formulary for every indication approved by the Food and Drug Administration (FDA), unless the indication is statutorily excluded from Part D coverage or included in compendia. Moving forward, we may see Part D sponsors utilizing step therapy-like requirements within a prior authorization, requiring the use of one formulary drug for a certain indication before authorizing coverage of a second drug for that same indication.

One caveat CMS cautions is that if a Part D sponsor limits drug formulary coverage to a certain indication, it must ensure that there is another therapeutically similar drug on formulary that covers the non-formulary indication. Also, existing formulary requirements, including the Part D transition requirement, will still apply (eg, if a drug is excluded from the formulary for a non-protected class indication, it would still need to be on-formulary for the protected class indication). Moreover, if a Part D sponsor has excluded specific indications for a drug from its formulary, requests for coverage for the excluded indications will be treated as an exception request for an off-formulary drug.

Various patient and physician advocacy groups, including the American Medical Association, the Community Oncology Alliance, and the American College of Rheumatology, are opposed to this latest development. They believe adding this indication-specific flexibility will shift treatment decision-making power away from doctors and toward insurance companies; they fear this could restrict the already narrow treatment options available to patients. Additionally, patients who may not be well versed in how formularies work will face the challenge of navigating health plans to ensure their drug is covered for their specific indication.

In addition to the memo to Part D sponsors, CMS issued a press release and a fact sheet on the policy change.


Looking for a Safe Harbor to Dock My Contract: HHS RFI Anti-Kickback Statute


Last week, the Department of Health and Human Services (HHS) issued a Request for Information (RFI), seeking public input on how the department can promote care coordination and advance the delivery of value-based care by amending the Anti-Kickback Statute. While the statute is intended to protect against fraud and abuse, current statutes are viewed as an impediment to arrangements that could advance coordinated care. The comment period ends October 26.
Topics on which HHS specifically requested comments include:

  • Any potential arrangements that industry is interested in pursuing, such as care coordination, value-based arrangements, and alternative payment models
  • How new safe harbors could be added to further promote such arrangements
  • The types of beneficiary incentives providers and suppliers are interested in providing and how these incentives would improve outcomes

Since certain financial arrangements offering remuneration to a beneficiary may be considered an inducement and could trigger civil monetary penalties, HHS also requests stakeholders detail their concerns about subsidizing beneficiary cost-sharing obligations, especially when they are a barrier to care delivery and value-based arrangements.  

This request for information follows another RFI issued June 25, wherein HHS identifies barriers to coordinated care and innovation under the physician self-referral law (“Stark Law”). Similarly, HHS invited stakeholders to address any undue regulatory aspects
Modifications to the existing law have the potential to dramatically alter the relationship among manufacturers, providers, and beneficiaries and are seen as critical to rewarding value. Of particular interest is the scenario being considered where manufacturers set prices contingent on patient outcomes.


How Policy Impacts Patient Support


Seismic shifts in the healthcare policy landscape can play a considerable role in altering the need and demand for patient support services offered by manufacturer programs.

Since the inauguration of President Donald Trump, congressional Republicans have launched significant undertakings to reform the laws that govern America’s complex healthcare system. Despite the push, efforts to repeal and replace the Affordable Care Act have fallen short. 

Xcenda’s Ana Stojanovska and Corey Ford, both with the Reimbursement & Policy Insights team, examine the impact of policy changes to patient support in a new Insights article. Read now >



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Legislative Bytes


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Cuts Both Ways: Sequestration Hits Community Oncology Hard


A new study of community oncology practices has found a net loss of $78 million in Medicare revenue due to sequestration from January 2016 to March 2018, an average of more than $847,000 per practice. The study was authored by a member of the Community Oncology Alliance’s board of directors and InfoDive and InstrinsiQ, both subsidiaries of AmerisourceBergen.

The Budget Control Act of 2011 required mandatory across-the-board reductions in federal spending, also known as sequestration. As a result, Medicare fee-for-service (FFS) claims with dates of service or dates of discharge on/after April 1, 2013 incur a 2% reduction in Medicare payment. The 2% payment reduction has reduced the Medicare Part B reimbursement for drugs from average sales price (ASP) + 6% to ASP + 4.3%. The decrease has led to a 28% to 31% loss in drug-related operating margin during the time frame studied.

The net result of these revenue cuts, coupled with other market factors, has resulted in 3.5 community oncology practices closing each month over the past 2 years. These office closures, coupled with hospital acquisitions and mergers, have affected access to care for rural Americans, where oncology clinics are limited and likely to be smaller in size and more dramatically impacted by this revenue shortfall.

With community oncology practices receiving an average of 68% of Medicare Part B revenue from drugs, manufacturers should be aware of how these payment cuts are affecting their customers’ bottom lines and continue to explore efforts to improve patient access to their medications in the community oncology setting.


CMS Evaluation of Next Gen ACOs Shows Savings (Finally)


Last week, CMS released a report analyzing 2016 data, the first performance year of the Innovation Center’s Next Generation Accountable Care Organization (Next Gen ACO) Model. The report evaluates the impact of the 2-sided risk approach that resulted in a savings to Medicare of approximately $62 million while maintaining quality care for Medicare patients. Within the 18 active Next Gen ACOs, over 31,000 network providers delivered care to nearly 477,200 Medicare patients. Most of the Next Gen ACOs had previous Medicare ACO experience and, consistent with prior efforts, the savings seemed to be mainly based on reduced hospital and skilled nursing facility costs.

Compared to a 1-sided risk ACO, which is a bonus-only model for meeting quality and cost goals, a 2-sided risk ACO shifts some financial risk to the providers so that Medicare does not bear all of the costs. Currently, 82% of ACOs in the Medicare Shared Savings Program (MSSP) have chosen the 1-sided, “upside-only” model; if the ACO incurs losses, CMS still pays them.

ACOs almost overwhelmingly have enrolled in the 1-sided model, leading to CMS losing money, which resulted in a new proposal, called “Pathways to Success,” to encourage the adoption of models that mirror the tenets of the Next Gen ACO program. The proposal would shorten the path to 2-sided risk models, eliminate the bonus-only model in 2 years, and decrease the percent of shared savings from 50% to 25%.

However, the National Association of ACOs (NAACOs) worries that CMS is in too much of a rush to transition from 1-sided to 2-sided risk models. The association urges CMS to evaluate the results of MSSP, in addition to the Next Gen ACO model, to learn best practices and improvements before requiring more 2-sided risk participation. They fear too many 1-sided risk ACOs would exit the program entirely if required to absorb more risk, thus losing momentum of providers moving to value-based care.

Previous evaluations of the mostly 1-sided ACO models showed they did not reduce savings and only modestly increased quality of care. The aggregate success of the Next Gen ACO model may reflect both requiring ACOs to absorb risk and the institutional experience with the ACO model of care.

CMS has published a summary document providing the findings at a glance and a press release on the report.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:


Emerging Trends in PBM Restrictions on Commercial Copay Assistance


CBI Reimbursement & Access 2018

Xcenda’s Corey Ford, MHA, Director of Reimbursement Strategy and Tactics, teamed with Lash Group’s Jim Dickey, Director of Product Experience, to present the session “Emerging Trends in PBM Restrictions on Commercial Copay Assistance” at CBI’s Reimbursement & Access 2018 conference on August 15 in Philadelphia.

They examined and discussed the emerging copay accumulator trends. If you weren’t able to attend, you can still view their presentation.

Learn more >




“I’m not satisfied with the current state of the biologics market. Even as we meet to discuss these important issues today, not even half of the biosimilars approved by FDA have entered the market. Each approved biosimilar product that is not yet marketed means lost potential cost savings from a biosimilar product that meets FDA’s rigorous standards but is not yet available to patients, not yet available to compete with the reference product.”

– FDA Commissioner Scott Gottlieb, speaking before the agency’s “Public Hearing on Facilitating Competition and Innovation in the Biological Products Marketplace”

Source: “Public Meeting on Facilitating Competition and Innovation in the Biological Products Marketplace,” FDA, September 4





A study found, on average, hospitals charge 479% of their cost for drugs. Most hospitals (83%) charge patients and insurers more than double their acquisition cost for medicine, marking up the medicines 200% or more. The majority of hospitals (53%) markup medicines between 200% and 400%, on average. A small share of hospitals (17%) charge 7 times the price of the medicine.

Source: “Hospital Charges and Reimbursement for Medicines: Analysis of Cost-to-Charge Ratios,” The Moran Company, September 2018


AMCP 2018 Nexus

October 22–25 | Orlando, FL
Xcenda is proud to support AMCP at this year’s AMCP Nexus conference in Orlando. Meet with Xcenda’s team of experts and consultants at booth #407. Students are also welcome to join our team at the Residency and Fellowship Showcase on Wednesday, October 24, 5:00–8:00 PM ET. Learn more


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Senior Director,
Health Policy

Scott Shields
Associate Director,
Health Policy



Amy Grogg, PharmD
Senior Vice President | Commercialization Solutions | AmerisourceBergen Corporation

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Reimbursement & Policy Insights | Xcenda


Jenna Kappel | Isabell Kang | Scott Shields | Diane Smith | Stephen Wilson


Kylie Matthews | Ellen Olson


Sept. 7, 2018


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