CMS retreats on Part D rule intended to reduce drug costs and improve access

Needing to focus on making healthcare reform work, the Obama administration backed away last week from major changes proposed for the Medicare Part D prescription drug program, in the face of fierce political opposition from the healthcare industry and some patient advocacy groups.

The retreat offered political protection to Democrats running for election but disappointed experts who believe the proposals could have reduced costs and enhanced beneficiary choice and access without hurting coverage under the popular program. When the CMS released the proposed rule in January, it projected it would save the government $1.3 billion over five years. The agency's retreat showed once again that while everyone says they support controlling Medicare costs, actual measures to do so encounter intense political opposition.

The draft policy that the CMS introduced in January was intended to increase price competition, decrease fraud, and improve seniors' ability to make cost-effective choices among the participating private drug plans.

But many of the proposals were panned by various interest groups, particularly pharmacy benefit managers, and created political headaches for Democratic candidates asked to explain the policies. They included stripping a requirement that health plans provide coverage for most drugs in certain protected classes of medications. One industry-funded study said the proposed rule would have increased Medicare costs by up to $1.6 billion in 2015.

“You have a program that has high approval, with 90% of Medicare beneficiaries ranking it positively, and you want to change it?” said Mary Grealy, president of the Healthcare Leadership Council, a coalition of healthcare-company CEOs, including insurers, drugmakers, hospitals and universities. “That makes no sense, especially for those running for office this year.”

The Healthcare Leadership Council initiated a letter—signed by 371 drug manufacturers, health plans, provider organizations and patient groups, some of which receive industry funding—asking CMS Administrator Marilyn Tavenner not to move forward with the changes.

The proposed rule also provoked bipartisan criticism in Congress, with nearly 50 House members writing to urge Tavenner to change course.

Gone for now is the proposal removing the requirement that plans pay for “all or substantially all” drug offerings in six categories—antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants and immunosuppressants.

The proposal would have removed special protections for antidepressants, immunosuppressants and eventually antipsychotics. CMS said their special status hampered plans in negotiating discounts with drug makers.

Also gone is a proposal that each payer offer no more than two Part D plans within the same service area—one basic plan and one enhanced plan.

The agency argued that the ongoing closing of the Part D doughnut hole has reduced the need for enhanced benefits, and that reducing the number of plans would help beneficiaries make better choices. Researchers have found that few seniors switch plans even when switching would save them money.

The CMS also abandoned a proposal to bar Medicare Advantage plans from offering coverage options that replace plans that it previously required the insurer to terminate or consolidate because of low enrollment.

And finally, the CMS rolled back its intention to give all pharmacies the chance to be in a plan's preferred network if they accept the plan's contract terms on pricing and other factors.

That provision had bipartisan support from members of Congress representing rural areas because it was seen as increasing beneficiary access and convenience.

“Given the complexities of these issues and stakeholder input, we do not plan to finalize these proposals at this time,” Tavenner said in the letter. “We will engage in further stakeholder input before advancing some or all of the changes in these areas in future years.”

Tavenner said the CMS still will go ahead with proposals to increase consumer protections and antifraud provisions, both of which have bipartisan support. It also will finalize a proposal to ensure access to care in cases of natural disaster.

Stuart Guterman, vice president for Medicare and cost control at the Commonwealth Fund, said the Obama administration's change of course “shows they are willing to listen to the feedback.”

But dropping the “any willing pharmacy” provision was a blow to community pharmacists, who say the CMS was swayed by large retailers such as Wal-Mart and pharmacy benefit managers that own mail-order services, which have benefited from the restricted networks that are now employed in about 70% of Part D plans.

“That's what drove a knife through my heart today,” said Jason Wallace, president of the Pharmacists United for Truth and Transparency, a coalition of independent pharmacists and pharmacy owners. “CMS recognized that there was a problem and basically someone way more powerful than you and I has convinced the CMS otherwise.”

Follow Virgil Dickson on Twitter: @MHVDickson