The Senate Finance Committee unveiled the Prescription Drug Pricing Reduction Act of 2019 (PDPRA). The long-awaited legislation on drug prices includes a number of changes to Medicare and Medicaid.

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July 26, 2019

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A Man Can Die But Once, How About Pharma?

 
 

On Tuesday, the Senate Finance Committee unveiled the Prescription Drug Pricing Reduction Act of 2019 (PDPRA), introduced by Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR). The long-awaited legislation on drug prices includes a number of changes to Medicare and Medicaid.

Yesterday, the committee voted 19-9 to advance the bill after a mark-up period that saw Republicans attempting multiple times to exclude the inflation caps in Part D (described below). A Republican amendment to bar an international pricing index (IPI) in Part B also failed, as did a Democrat amendment to allow price negotiations in Medicare. While it seems really exciting, we are still in the early stages of this process. As Sen. John Cornyn (R-TX) said at yesterday’s mark-up, “This bill is not anywhere near ready for action on the floor.”

The Congressional Budget Office estimated that the proposal would save taxpayers $100 billion over 10 years through both Medicare and Medicaid changes. Beneficiaries could save $27 billion in out-of-pocket (OOP) costs over the next 10 years and an additional $5 billion in premium costs.

Select provisions are below.

Medicare

Part B

  • Manufacturers would be required to exclude from each drug’s reported average sales price (ASP) the value of coupons provided to privately insured individuals beginning July 1, 2021.
  • A wholesale acquisition cost (WAC) add-on payment of no greater than plus 3% when ASP is unavailable for new drugs, biologicals, and biosimilars furnished on or after January 1, 2019.
  • Biosimilars furnished on or after July 1, 2020 for the 2-quarter initial period would be paid the lesser of the biosimilar’s WAC plus 3%, or ASP plus 6% of the reference biological product.
  • The add-on payment for a biosimilar would be increased from 6% of the reference product’s ASP to 8% of the reference product’s ASP for 5 years starting January 1, 2020.
  • Beginning January 1, 2021, manufacturers would be required to pay a rebate to Medicare for the amount that their Part B drugs or biologicals increased above the inflation rate (Consumer Price Index for All Urban Consumers [CPI-U]).
    • Part B biosimilars and vaccines would be excluded from this policy.
    • Drug/biological units for which a manufacturer provides a 340B discount or a Medicaid rebate, as well as units paid under the end-stage renal disease payment system, would be excluded from the rebate calculation.
  • Beginning July 1, 2021, manufacturers would have to refund the amount of payment made to providers for unused amounts of certain single-use vials that exceed a minimum threshold (10% of the amount Medicare paid for the total units).
  • “Bona fide service fees” would no longer include fees based on the percentage of sales and fees that take into account the volume or value of any referrals or business otherwise generated between the parties.
  • $1,000 would be the maximum add-on amount that a provider can be paid for a drug, biological, or biosimilar administered in 2021 through 2028. For 2029 and each subsequent year, the $1,000 maximum add-on amount would be updated by CPI-U.
  • The exception for “grandfathered” off-campus hospital outpatient departments (HOPDs) would be removed; therefore, the payment for the professional service of administering a Part B drug would be made at the physician fee schedule (PFS) rate rather than the outpatient prospective payment system (OPPS) rate beginning January 1, 2021.

Part D

  • The standard Part D benefit would be reformed by eliminating the “donut hole” and implementing a beneficiary catastrophic spending cap. Beneficiaries would have a universal cost-sharing of 25% after the deductible is met until they have spent $3,100 in true OOP costs in 2022 (the amount is indexed to Part D inflation). Plans would be responsible for a greater percentage of costs starting above this threshold (20% in 2022, 40% in 2023, and 60% in 2024 and beyond). The current branded drug discount in the donut hole would sunset, and branded drug manufacturers would be required to provide a 20% discount in the catastrophic phase.
  • The Department of Health and Human Services (HHS) would be allowed to share Part D and Medicaid price and rebate data with the Medicare Payment Advisory Commission (MedPAC) and the Medicaid and CHIP Payment and Access Commission (MACPAC).
  • The bill would provide transparency for prescription benefit managers’ (PBMs) rebates, discounts, payments, and direct and indirect remuneration (DIR) amounts, among others. These provisions would be effective for the 2022 plan year.
  • Effective in 2021, Part D plans would have access to and be allowed to use fee-for-service (FFS) claims data for drug coverage determinations related to approved purposes.
  • Beginning in 2022, manufacturers would be required to pay rebates to the Medicare program for certain drugs when the list price (WAC) increases at a rate greater than CPI-U over a 6-month period.

Medicaid

  • Authorized generic drugs would be excluded from the calculation of average manufacturer price (AMP) under the Medicaid Drug Rebate Program (MDRP).
  • Pass-through pricing for covered outpatient drugs would be required, and spread pricing for purposes of federal matching payments would be prohibited.
  • States would be allowed to pay for potentially curative covered outpatient drugs that are intended for 1-time use through risk-sharing value-based agreements via installments beginning in 2022.
  • The Medicaid rebate cap would be increased from 100% of a covered outpatient drug’s AMP to 125%, starting in fiscal year 2022.
    • This provision would allow states, for purposes of the MDRP, to consider the term “covered outpatient drug” as including any drug, biological product, or insulin that is part of bundled payment, as long as it is provided on an outpatient basis as part of physicians’ services or outpatient hospital services.

Miscellaneous

Effective July 1, 2022, manufacturers would be required to justify price increases for drugs and biologicals when the HHS Secretary determines the manufacturer’s price increase met or exceeded certain thresholds. PhRMA issued a statement opposing the bill, saying, “It would siphon more than $150 billion from researching and developing new medicines and give those savings to the government, insurers, and PBMs, instead of using those savings to lower costs for seniors at the pharmacy counter.”

America’s Health Insurance Plans (AHIP) applauded the bill, stating, “We urge the Senate to support these solutions, and to reject efforts to raise premiums and costs for seniors and taxpayers….”

The PDPRA represents the most sweeping changes to prescription drug pricing since, perhaps, the Medicare Modernization Act of 2003. But it is just a bill that has gotten a committee vote. Expect lots of behind-the-scenes discussions over the next few weeks. What is interesting is that the bill provides an idea of where the drug pricing discussions are going, at least directionally. There seems to be momentum for a Part D OOP cap, keeping drug increases down through an inflation cap, and continued angst over the IPI from Republicans.

We are still waiting to hear from the House on its drug pricing proposed legislation, slated to be released in September.

 
 

Making Part D Access Affordable: Revising the Prescription Drug Benefit for 2020+

 
 

Policymakers are discussing ways to limit the OOP expenses faced by patients in the Medicare prescription drug benefit (Part D) to make prescriptions more affordable.

Xcenda’s original research, done on behalf of the Council for Affordable Health Coverage, examines the 2 models Congress is considering, with patient profiles for typical patients with various conditions, to determine the impact of the models on patient OOP spending.

View and download the report >

 

 

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LEGISLATIVE UPDATE
 

Legislative Bytes

 
 
  • Senate Health Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) confirmed that they will delay a full floor vote on the Lower Health Care Costs Act of 2019 (S 1895) until September. The bill would prevent surprise medical bills, address high drug prices, and lower healthcare costs.
  • Sen. Ted Cruz (R-TX) introduced S 2161 that would provide for reciprocal marketing approval of certain drugs, biological products, and devices that are authorized to be lawfully marketed abroad.
  • Sen. Jeanne Shaheen (D-NH) introduced S 2199 that would provide patient protections with respect to the cost of insulin.
  • Rep. Mark DeSaulnier (D-CA) introduced HR 3835 that would provide for coverage of cancer care planning and coordination under Medicare.

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THE VALUE CORNER
 

To QALY or Not to QALY, That Is the Question

 
 

Last Friday, the American Journal of Managed Care published an editorial written by National Pharmaceutical Council (NPC) Chief Scientific Officer Dr. Robert Dubois asserting that having only 1 group, such as the Institute for Clinical and Economic Review (ICER) in the US or the National Institute for Health and Care Excellence (NICE) in the United Kingdom (UK), conduct evaluations of new drugs and services is insufficient. Dubois points out that the results of cost-effectiveness assessments performed by ICER and NICE are often notably different, particularly their calculations of the incremental cost-effectiveness ratio (ie, cost per quality-adjusted life-year [QALY]). Because the incremental cost-effectiveness ratio treats all patients the same, these assessments do not adequately represent the complexities of new therapies. It is important, then, to have several organizations performing multiple evaluations so stakeholders have access to additional information to make more informed decisions.

In another recently published commentary in The Journal of Law, Medicine & Ethics, Dr. Steven Pearson, President of ICER, advocates for the continued use of the QALY as part of health technology assessments. While Pearson acknowledges that the “cost per QALY” metric does not answer all the questions relevant to policymakers, it represents the most reliable and objective method for assessing the value of therapies across a variety of conditions. He also emphasizes that organizations, like ICER, do not rely solely on the QALY to make healthcare decisions. Rather, it is 1 part of a robust public process that incorporates other considerations, including society-specific values, in deliberations of what constitutes a “fair price.” Although misunderstandings and opposition to the QALY are likely to continue, these discussions are important as they help to expose the problems of a fragmented and inequitable healthcare system.

Additionally, on Wednesday, ICER announced the publication of a Draft Evidence Report assessing the comparative clinical effectiveness and value of additive therapies to treat cardiovascular disease, including VASCEPA (icosapent ethyl) and XARELTO (rivaroxaban), which will be available for public comment until August 20 at 5:00 PM ET. The Final Evidence Report will be published on September 12, and the findings will be reviewed during a meeting of the Midwest Comparative Effectiveness Public Advisory Council (Midwest CEPAC) on September 26.

As always, if you need assistance with all things ICER or value-related, please contact kristen.migliaccio@xcenda.com.

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REGULATORY UPDATES
 

Friends, Policy Nerds, Countrymen—Lend Me Your Ear:
Harris’ Plan to Lower Prescription Drug Costs

 
 

With the cost of prescription drugs being a major focus, presidential hopefuls have addressed their plans to curb expenses to patients and payers. A plan unveiled by Sen. Kamala Harris (D-CA) last week would involve the government in drug negotiations and price setting. It targets prescription drugs whose price increases annually by more than the cost of inflation in the US or that are sold for more than 100% of the “International Reference Price,” their average price in other Organization of Economic Cooperation and Development (OECD) countries such as Canada, the UK, France, Germany, Japan, or Australia.

Harris’ proposal includes:

  1. HHS setting a “fair price” for targeted drugs, and updating the fair price for each identified drug at least annually with a cap for inflation
  2. Imposing a tax rate of 100% on drug profits exceeding the “fair price,” the revenues of which would be directed to consumers via point-of-sale or mail-in rebates
  3. Closing a tax deduction for pharmaceutical companies’ direct-to-consumer advertising expenses

And, if Congress were to refuse to act within her first 100 days as President, her proposed executive action would include:

  1. Appointing an attorney general to prioritize investigations of abusive drug pricing/price gouging practices by drug manufacturers that continue to price their products above the “fair price”
  2. Allowing importation of drugs from Canada or other countries
  3. Using the government’s existing authority to “march in” and license a drug company’s patent to a lower-cost competitor

Harris’ plan would dramatically change how the system for determining drug prices currently works in the US. Many of the provisions are similar to views espoused by other Democratic presidential candidates. But, given that they are said on the campaign trail, the proposals have to be seen as just that—proposals. It is clear that drug pricing has become a touchstone issue for many voters as they face great OOP costs at the point of sale, and the drug industry will have difficulty changing that conversation. Expect the pressure on pharmaceutical manufacturers to be constant, requiring a focus on the value of innovation and the trade-offs of drug pricing changes.

 

Shall I Compare Thee to High-Performing ACOs?

 
 

The Office of Inspector General (OIG) recently released a study of 20 high-performing accountable care organizations (ACOs), all of which had reductions in Medicare spending and provided high-quality care.

The purpose of the study was to understand the strategies that certain ACOs have found to be successful in reducing spending and improving quality. These strategies included working with ACO physicians so they become more aware of costs, engaging beneficiaries to improve their own health, and managing beneficiaries with costly or complex care needs. Other strategies that ACOs found successful involve reducing avoidable hospitalizations and controlling costs and improving quality in skilled nursing and home healthcare. Additional strategies involve addressing behavioral health needs and social determinants of health and using technology to increase information sharing among providers.

The OIG recommended the Centers for Medicare & Medicaid Services (CMS) take the following actions to support efforts to reduce unnecessary spending and improve quality of care for patients:

  1. Review the impact of programmatic changes on ACOs’ ability to promote value-based care
  2. Expand efforts to share information about strategies that reduce spending and improve quality among ACOs and more widely with the public
  3. Adopt outcome-based measures and better align measures across programs
  4. Assess and share information about ACOs’ use of the skilled nursing facility 3-day rule waiver and apply these results when making changes to the Shared Savings Program or other programs
  5. Identify and share information about strategies that integrate physical and behavioral health services and address social determinants of health
  6. Identify and share information about strategies that encourage patients to share behavioral health data
  7. Prioritize ACO referrals of potential fraud, waste, and abuse

CMS concurred with all of the OIG’s recommendations.

If CMS can propagate the strategies listed by the OIG to other ACOs, the agency may be able to achieve the twin goals of the Shared Savings Program—lowering costs and increasing quality.

 

Nothing Will Come of Nothing, Unless the Providers Show Up

 
 

On Monday, North Carolina State Treasurer Dale Folwell and the State Health Plan announced they are reopening enrollment for medical providers to sign up for the State Health Plan Network.

The North Carolina State Health Plan Network, effective January 1, 2020, will provide coverage to more than 700,000 teachers, state employees, retirees, and their dependents.

The plan had previously shown poor enrollment at the July 1 end-date after adopting a reference-based reimbursement policy for providers, averaging 182% of Medicare rates. The new proposed rate has increased reimbursement to 196%, which will hopefully expand access to care for the teachers, lawmakers, and other government personnel enrolled in the State Health Plan.

While this new rate presents a positive step for increasing reimbursement, it may not be enough to satisfy the state’s providers. According to a RAND Corporation study, hospitals in North Carolina receive 230% of the Medicare rate, on average, from commercial health plans. As of now, none of the state’s major hospitals have agreed to the proposal, and 97% of State Health Plan participants would be out of network. Julie Henry, a Vice President of the North Carolina Healthcare Association, has criticized Treasurer Folwell’s initial proposal. “We do not think it’s the appropriate path forward for the State Health Plan because it’s a short-term solution,” she said. Rather than implementing more value-based approaches where hospitals share risk with health plans, Henry admonished Folwell, saying that “the State Health Plan is not looking to modernize its approach, it’s just looking at paying less.”

As Treasurer Folwell continues to play tough with the State Health Plan’s provider contracting, countless state employees wait to see if they will be able to maintain access to affordable healthcare at their local hospitals and doctors’ offices. While the size of the health plan—with over 700,000 beneficiaries—may provide some contracting leverage, it remains to be seen whether the revised proposal will bear more fruit than the original. Until the major hospital networks accept the terms, or the Treasurer backs down, state employees remain caught in the middle without access to care.

 

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:



 
HEARD ON THE STREET
 

Editor’s Note: Umm…so what is IPI? This is very midsummer madness.

“The secret of the public option is that it’s only cheaper because it uses the force of government to strong-arm doctors and hospitals into accepting below-market payment rates.”

– Seema Verma, CMS Administrator

 Source: “Keynote Remarks by Administrator Seema Verma at the Better Medicare Alliance (BMA) 2019 Medicare Advantage Summit,” July 22

 
POLICY BY NUMBERS
 

74%

 

A Morning Consult national tracking poll found that 74% of Americans believe a national health information database would risk the privacy of millions of Americans.

Source: “National Tracking Poll, Project: 190645,” Morning Consult, June 2019

 

Experience Our Gallery of Innovation

 
 

For 25 years, the creative, scientific minds of Xcenda have been delivering access “firsts.” We proudly launched the first reimbursement field team, developed the first outcomes analyzer, and created the concept of the product value proposition—all by staying focused on being patient-first.

This year as we celebrate our silver anniversary, we continue our tradition of firsts with a series of new innovative digital solutions. From developing new methods of immersion training to offering new ways to analyze evidence and enhance messaging, we invite you to join us at the forefront of innovation.

Take a moment to look at some of our most recent market access inventions, and let’s talk about how Xcenda’s Value Experts can help you prove value and maximize patient access for your portfolio of products.

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.

 
 
 
 
 
FEATURED CONTRIBUTORS
 

EDITOR-IN-CHIEF:
Jennifer Snow
Vice President,
Reimbursement and
Policy Insights,
Xcenda

MANAGING EDITOR:
Scott Shields
Associate Director,
Health Policy
Xcenda

 

ADVISORY BOARD:

Doug Cook
President | Commercialization Services & Animal Health

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

CONTRIBUTING AUTHORS:

Milda Kaitz | Anne Loos | Jefferson Pike | Scott Shields

PRODUCTION:

Laurie Kozbelt | Ellen Olson

 

July 26, 2019

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