CMS unveils new Medicare Advantage and Part D voluntary payment models.

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Jan. 25, 2019


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No Such Thing as a Free Lunch: CMS Tries Balancing Value and Access in Part D, MA


Last week, the Centers for Medicare & Medicaid Services (CMS) announced that the Center for Medicare and Medicaid Innovation (CMMI) has developed a new payment model (Part D Payment Modernization model) and radically transformed the Medicare Advantage (MA) Value-Based Insurance Design or “VBID” model. CMS stated the models are designed to enable Part D and MA plans to “better serve patients and help them achieve good health.”

Part D Payment Modernization Model

Currently in Part D, once a patient’s prescription drug spending is high enough for the patient to enter the “catastrophic phase,” Medicare is responsible for 80% of drug costs, the plans pay 15%, and the patient pays the remaining 5%. CMS reported that over the past 10 years (2008–2017), annual federal spending in the Part D catastrophic phase increased from $9.4 billion to $37.4 billion, reflecting an average increase of 17% per year.

Under this voluntary Part D Payment Modernization model, participating plans will assume greater risk for spending in the catastrophic phase of Part D; the Administration hopes this will incentivize plans, patients, and providers to choose drugs with lower list prices. CMS will calculate a spending target for what governmental spending would have been without plans taking on this additional risk. This is a 2-sided risk model—participating Part D plans will share in savings if they stay below the target but will be accountable for losses if they exceed the threshold.

The Part D Payment Modernization model will take effect in January 2020. The model’s website and fact sheet contain more detailed information.


The MA VBID was originally launched in 2017 as a voluntary model designed to reduce Medicare program expenditures, enhance quality of care for Medicare beneficiaries, and improve the coordination and efficiency of healthcare service delivery. Beginning in the 2020 plan year, the 5-year MA VBID model will include a wide range of enhancements and new interventions that will test service delivery options for participating plans, including:

  • Providing reduced cost-sharing and targeted benefits to enrollees, reducing patient financial responsibility, and allowing for customized plans based on a patient’s condition
  • Offering new wellness incentive programs to patients at a higher value than previously allowed
  • Utilizing telehealth services
  • Offering patients wellness and healthcare planning

The calendar year (CY) 2020 VBID application period is open now through March 1, 2019. Eligible MA plans in all 50 states can apply to test the new interventions. Participating plans will test 1 or more of the new interventions introduced to the VBID model through CY 2024. During the performance period, CMS will continue to monitor whether these new interventions are successful in reducing cost and improving quality of care to Medicare beneficiaries.

Additional information about the VBID model is at the CMMI website, in the fact sheet, and in the CY 2020 Request for Applications.

CMS said the 5-year Part D Payment Modernization model is a facet of the President’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. Meanwhile, according to CMS, the revised VBID model should expand treatment options and facilitate better member health.


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If at First You Don’t Succeed…Oh Heck, at Some Point You Give up—Importation News


Legalizing drug importation continues to be at the top of the agenda for Democrats—and now for some Republicans. Earlier this month, Sens. Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) introduced the bipartisan S.61, the Safe and Affordable Drugs from Canada Act of 2019.
S.61 would allow for the personal importation of prescription drugs from authorized Canadian pharmacies. The list of allowable prescriptions would be limited, and it would not include products such as infused or intravenously administered drugs and biologics.
More comprehensive importation bills were recently introduced by Sens. Cory Booker (D-NJ) and Bernie Sanders (S-VT); however, such bills will most certainly fail in the Senate, given the Republicans’ historical stance on importation.
On Wednesday, former Food and Drug Administration (FDA) Associate Commissioner Peter Pitts offered a sharp criticism of S.61: “At best, the bill would yield little savings. At worst, it could endanger American lives by opening the floodgates to harmful counterfeit drugs.”
Not waiting for Congress to take action, states such as Vermont are working to obtain approval by the Department of Health and Human Services (HHS) to establish state-administered wholesale importation programs, previously reported in Health Policy Weekly.  

In the case of S.61, importation proponents are hopeful. As a Republican and Chairman of the Senate Finance Committee, Grassley’s bill is more likely to be afforded serious consideration by Senate Republicans. The Administration has also signaled a willingness to consider allowances for importation. Last July, the FDA launched an importation work group to develop options for addressing off-patent single-source drugs.


Legislative Byte


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Introducing...THE VALUE CORNER

Welcome to the Value Corner, a new featured column in Health Policy Weekly. This column will appear periodically focusing on important current topics related to the evolving value landscape in the US. Keep an eye out in future issues for relevant news and updates.


How About Them Apples? ICER Stares Down Drugs With Price Increases


Last week, the Institute for Clinical and Economic Review (ICER) announced plans for a new annual analysis that will examine “significant” prescription drug price increases and determine whether new clinical evidence exists to support those increases. This initiative is aimed at tackling (ie, putting downward pressure on) drug prices.

The draft protocol of the “Unsupported Price Increase Assessment” describes how ICER proposes to generate a report of up to 13 drugs that have experienced substantial price increases over the past 24 months, based primarily on which net price increases resulted in the largest overall budget impact for the US health system. ICER will review changes in the evidence base for these drugs and report on whether potential evidentiary support for price increases was found. ICER will seek input from pharmaceutical companies, patient advocacy groups, and payers representing both Medicaid and the private market.

The draft protocol is currently open for public comment. Comments can be submitted by email to and must be received by 5:00 PM ET on February 13, 2019. ICER expects to publish the first of the annual Unsupported Price Increase Assessments in October 2019. More details about the assessment can be found here.

Also, ICER announced this week a new international collaborative to develop and test alternative methods for the evaluation of potentially curative treatments and for translating the results of cost-effectiveness analyses into recommendations for value-based price benchmarks. ICER will collaborate with methodology experts, stakeholders, and several leading international health technology assessment groups, including both the United Kingdom’s National Institute for Health and Care Excellence (NICE) and the Canadian Agency for Drugs and Technologies in Health (CADTH).

ICER is slowly, but surely, staking its claim in the drug-pricing debates by expanding the purview of its analyses. Its initial assessments targeted single drugs, whereas now it is tackling any drug with “significant” price increases, as well as expanding internationally. If you need assistance with all things ICER, please contact

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Groundhog Day, 2 Weeks Early: Recapping MedPAC


It’s a new year, but we’re hearing the same old things from the Medicare Payment Advisory Committee (MedPAC) about ways to decrease the costs of prescription drug prices.

At its meeting last week, the independent advisory board to Congress discussed changes that should be made to the Medicare Prescription Drug Program (Part D), including a transition of Medicare’s reinsurance to plans from 80% to 20% of total drug spending incurred by Part D enrollees above the catastrophic coverage threshold. Seemingly coincidentally, CMS announced the Part D Payment Modernization model this week that revises payments in the catastrophic phase. (See featured article.)

A focus on reinsurance was also included in MedPAC’s January 16 letter to CMS Administrator Seema Verma on the proposed rule on Modernizing Part D and MA to lower drug prices and reduce OOP expenses.

Other Part D recommendations to Congress included:

  • Applying the coverage gap discount to biosimilar products
  • Excluding all manufacturer discounts in the coverage gap for enrollees; “true out-of-pocket” (TrOOP) spending
  • Eliminating cost-share above the out-of-pocket threshold

MedPAC still believes that changes should be made to Part B’s average sales prices as detailed in the advisory commission’s Drug Value Program discussed at its January 2017 meeting.

During Friday’s meeting, MedPAC members voiced concerns that, while they continue making recommendations to help Congress rein in the high cost of Medicare drugs, the trends for some specialty drugs continue to rise rapidly. They also noted that beneficiaries who reached the catastrophic phase with a single claim increased dramatically, from 33,000 in 2010 to 360,000 by 2016.

While there is hope that biosimilars and more personalized medicine will result in competition and lower drug costs, MedPAC members expressed frustrations about the discounts manufacturers give to pharmacy benefit managers to obtain preferred formulary status. They believe this “rebate trap” must be removed for biosimilars to succeed; otherwise, they fear beneficiaries will have difficulty gaining access to the lower-cost therapies.

Expect discussions about reforms to both Part B and Part D to continue at the next meeting in March, with some new topics including outcomes-based pricing, indications-based pricing, and direct negotiation for Medicare.


Working Until the Well Is Dry: Draft Guidance for Rare Disease Drug Development


Last week, the FDA announced new draft guidance to industry addressing the issues in drug development for rare diseases (ie, affecting less than 200,000 patients in the US). These issues are more frequently difficult to address with drugs targeting rare diseases due to limited medical and scientific knowledge, natural history data, and drug development experience as compared to other drugs. This guidance revises and replaces the older version issued in August 2015.

The draft guidance included the following updates:

  • Included issues related to evaluation and validation of surrogate biomarkers for successful development of drug treatment for rare diseases
  • Allowed the broadest flexibility in applying statutory standards while ensuring the safety and effectiveness for drugs to treat serious and life-threatening diseases
  • Included additional information on the use of historical (external) controls and early randomization for serious rare diseases with unmet medical need
  • Encouraged sponsors to discuss their plans for maximizing the quantity and quality of safety data in early meetings with the FDA
  • Added a new section for additional considerations, such as patient centricity, considering expedited programs, including pediatric patients in premarketing clinical studies, and seeking early scientific and medical discussion for drug development considerations through a forum called Critical Path Innovation Meetings

The FDA indicated that developing a drug or biologic for a rare disease can be “especially challenging” and wants to provide clear information to drug developers so “they can plan modern, efficient drug development programs that will be successful.”

In its press release, the FDA also acknowledged that the federal government’s partial shutdown is hampering its efforts, and that for products covered by a user fee program, such as those for treating rare diseases, its review of existing medical product applications and associated policy development regarding FDA review is funded by limited carryover user fee balances.

The FDA will accept comments on the draft guidance through the Federal Register for 60 days.


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:

  • We usually skip reading the proposed annual Notice of Benefit and Payment Parameters (NBPP), but not this year. The annual notice proposes regulatory and financial parameters applicable to qualified health plans (QHPs) on the Exchanges, plans in the individual, small-group, and large-group markets, and self-funded group health plans. Notably, for the 2020 benefit year, the NBPP proposes: excluding manufacturer copay coupons from cost-sharing calculation; excluding brand drugs from the essential health benefits if a generic is available; and implementing dollar limits on brand drugs and reference-based pricing. For additional information, please see the fact sheet, 2020 letter to issuers, 2019 Rate Review Timeline Bulletin, and 2020 Actuarial Value (AV) Calculator documents.
  • The New York State Medicaid Drug Utilization Review Board will review Johnson & Johnson’s biologic REMICADE (infliximab) at its February meeting. This is the second drug to come before the board as part of its new mission to recommend supplemental rebates for “high-priced” drugs in Medicaid. Medicines can be referred to the board if they cost the program at least $2.2 million, or $13,000 per claim, in 2017—placing them in the top 3% of net spending or net cost per claim. If a supplemental rebate is recommended and the company does not agree, the state can require prior authorization for the drug or even direct its managed care organizations to remove it from their formularies.
  • The American Hospital Association (AHA) has provided guidance to hospitals about how to respond to the December order by the US District Court for the District of Columbia to stop CMS’ nearly 30% reduction in the reimbursement rate for 340B drugs. AHA recommends that hospitals continue to pursue appeals for 2018 and initiate appeals for reduced payments in 2019, as outlined in this memo.
  • The FDA approved Samsung Bioepis’ ONTRUZANT (trastuzumab-dttb), a biosimilar to Genentech’s HERCEPTIN (trastuzumab). This is the third biosimilar of trastuzumab to receive FDA approval. The FDA previously approved Celltrion’s HERZUMA (trastuzumab-pkrb) and Mylan’s OGIVRI (trastuzumab-dkst). ONTRUZANT represents the 17th biosimilar approved by the FDA. Seven biosimilars are being marketed.


New Infographic: Medicare Part B: Do Providers Choose Treatment Based on Payment?


What do Medicare claims data reveal about physician-administered drugs? Our study found no strong positive correlation between drug payment and utilization. View our infographic to learn more:

View infographic >




“Health clinics and hospitals are monitoring a potentially huge money shift away from hospitals in the program in the wake of Democratic Gov. Gavin Newsom’s sweeping executive order on drug pricing….

“Newsom’s order as drafted would move all the Medicaid managed-care drugs to Medicaid fee-for-service. Healthcare lawyer Jason Reddish projected this could effectively wipe out the profits for 340B hospitals and clinics and remove contract pharmacies from the chain.”

Source: “California’s drug-pricing plan could pare down 340B program,” Modern Healthcare, January 23



0.6% / 1.5%


Drug price growth at −0.6% in December was the lowest year-over-year rate since 1973. Full-year drug prices were up 1.6% in 2018, the lowest since 0.6% in 2013.

Source: “January 2019 Health Sector Economic Indicators Briefs,” Altarum Institute, January 22


CBI PAP 2019: 20th Annual Patient Assistance & Access Programs

March 4–6 | Baltimore, MD
Join Xcenda and Lash Group at the upcoming CBI PAP 2019 Conference in Baltimore, MD March 4–6. Xcenda’s Vice President of Reimbursement and Policy Insights and Editor-in-Chief of Health Policy Weekly, Jennifer Snow, MPH, will deliver the state of the industry address titled, “The Evolving Healthcare Landscape and the Impacts on Patient Access and Affordability.” Lash Group President Tommy Bramley, PhD, will deliver the conference’s keynote on “Empathy and Expertise—Evolving Patient Support Programs in the Digital Age.” 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
Vice President,
Reimbursement and
Policy Insights,

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 | Commercial Consulting | Xcenda


Jenna Kappel | Vasantha Kolluri | Reeya Patel | Scott Shields | Linnea Tennant | Tammy Washington | Steve Wilson


Laurie Kozbelt | Ellen Olson


Jan. 25, 2019


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