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Medicare Part D Proposed Rule: Where Did Things Go Wrong?



March 6th, 2014

It’s worth sitting up and taking notice when everyone seems to hate what you are doing. Last week, 20 of the 24 members of the sometimes fractious Senate Finance Committee wrote Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner about a Medicare Part D proposed rule CMS published on January 10. They told her that they were “perplexed as to why CMS would propose to fundamentally restructure Part D …” and urged her to scrap the plan.

The House Energy and Commerce Committee held a hearing, also last week, with the hardly neutral title of “Messing with Success: How CMS’ Attack on the Part D Program Will Increase Costs and Reduce Choices for Seniors.” At the hearing, Medicare Chief Jon Blum, one of the most well-liked federal health officials there is, was subjected to a bipartisan, first class, grilling.

These Congressional complaints followed on the heels of a Feb. 28 letter slamming the proposed rule from 277 organizations (with more organizations continuing to sign on) including patient advocates, insurance companies, health plans, pharmacists, employers, and both brand and generic drug companies.

In fairness to CMS, this is only a proposed rule and comment is what they are seeking.  Well, it is comment that they are getting.  What has led to this firestorm of criticism?

A Move Toward Increased Regulation Of Competition In Part D

Fundamentally, CMS has suggested some major changes to the now decade-old Medicare prescription drug program that get to the heart of a longstanding controversy with Part D: To what degree should CMS regulate competition to protect beneficiaries and taxpayers, versus allowing competition itself to police the marketplace and control spending? With these proposals, CMS has largely opted to further insert itself into directing — some would say micromanaging — the terms of competition in Part D.

In the process, its proposals have united a disparate group of interests who, while not agreeing on much else, nevertheless agree that they want this proposal to simply go away. While some may like parts of the proposed rule, as a whole the status quo is better than the future of Part D that CMS has presented.

New criteria for protected drug classes. One of the proposals involves protected classes. From the start of the Part D program, CMS believed that there were certain conditions for which patients and their physicians needed immediate access to a broad choice of medicines that might not be available if a Part D plan excluded some from their formularies. Among the six classes of drugs that CMS has “protected” by requiring plans to provide substantially all products on their formularies are cancer and AIDS drugs. CMS is now suggesting criteria for whether a class of drugs needs this protection and has applied these criteria to the current six. The result is that two classes, antidepressants and immunosuppressants, would immediately lose their protection and one, antipsychotics, might lose protection next year.

While the Part D plans support this result because of the additional, cost saving negotiating leverage it might provide them, drug companies and some beneficiary groups are deeply concerned. They claim that patients will be harmed because the criteria assume, they contend in error, that patients and their caregivers understand and can quickly navigate the process of appealing a drug coverage denial. Even groups that would not be immediately impacted, such as AIDS advocates, are wary of the CMS approach.

Expanding medication therapy management. Another issue is medication therapy management. This is a requirement in Part D that plans provide extra counseling and medication coordination to beneficiaries with multiple chronic conditions and high drug costs. CMS is proposing to greatly expand the use of medication therapy management. While pharmacy groups are cheering the move, the Part D plans question the value of the added costs. Weighing in on their side is the respected Medicare Payment Advisory Commission, MedPAC, who, in a Feb. 28 letter to CMS, questioned the expansion of the medication therapy management program because of their doubts that even the current effort is worthwhile.

Limiting plan offerings. CMS has also proposed a series of changes that would limit the number and kind of plans that may be offered under Part D. One change, vehemently opposed by the plan sponsors, would limit their ability to use networks of preferred pharmacies to, in their view, lower premiums and cost sharing for beneficiaries that choose plans that offer them. Some of the lowest premium cost and most popular choices in Part D use preferred networks. CMS is concerned that the preferred networks might actually increase costs. These limited pharmacy networks worry community retail pharmacists who are often left out.

CMS would also limit the number of plans each sponsor could offer in a region. They assert that beneficiaries often have too many choices that are confusing and not sufficiently different from each other. Opponents of the change don’t understand why CMS would want to take away choices from beneficiaries who, they assert, are able to do just fine in picking a plan that is right for them.

Breaching the principle of non-interference in drug pricing. And then there is the non-interference issue. While many Democrats and even some Republicans have questioned why CMS cannot negotiate with drug companies to reduce prices, the assurance of non-interference in drug pricing was critical to winning the narrow passage of the Part D program and is a concept that has its roots in President Clinton’s failed attempt to gain a Medicare drug benefit. In its proposed rule, CMS surprised everyone by stating that it needed to better define the limits of its powers related to drug pricing. It has proposed language that has alarmed the Part D plans and has provided little comfort to the drug companies.

In The Immortal Words Of Emily Litella …

Each of these issues and more have inflamed groups with strong interests in Part D. While all don’t agree on every issue, the strong push back to the proposed rule represents a conclusion by them that CMS has gone too far and in some wrong directions to increase its involvement in Part D.  It presents a political reality that now is not the right time to be rocking the Part D boat. CMS would be smart to adopt a line from the late Gilda Radner’s Saturday Night Live character Emily Litella who famously said, “Never mind!”

Note: Through his affiliation with Manatt, Phelps & Phillips, the author represents clients with interests in the Medicare Part D rulemaking discussed above, but the opinions in this post are his own.

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5 Responses to “Medicare Part D Proposed Rule: Where Did Things Go Wrong?”

  1. Rachael Stirling, RN, BSN Says:

    Medicare Part D is now boasted as an entitlement success story, with praise from both sides of the political aisle. Senior citizens have expressed high levels of satisfaction with the program, and Part D expenditures have been roughly 40 percent lower than initial government estimates according to the Congressional Budget Office.

    I recognize that ‘cost effective health care’ is a motivating force behind the extensive changes proposed by administration. Our nation needs cost-saving measures more than ever, but limiting drug coverage undermines a key protection for some of the sickest, most vulnerable Medicare beneficiaries. Medicare has traditionally required a broad coverage of drugs in these three classes, immunosuppressants, antipsychotics, and antidepressants because patients must often try several drugs before finding one that works. If beneficiaries do not have access to needed medication, costs will be incurred as a result of unnecessary and avoidable hospitalizations, physician visits, and other medical interventions.

    I am pleased to find out that outcries from both sides of the political aisle, as well as patient and consumer rights advocates, has resulted in the administration reversing course on the changes. More so, specifically that coverage for critical medications will remain strong and that the number of drug plans will not be limited in certain areas.

  2. Joe Jeffries Says:

    Your notion that CMS shouldn’t “manipulate the market place” suggests a supreme level of hypocrisy. This aspect that Part D had morphed into is what community pharmacy groups were trying to change. For example, plans were never supposed to brand cards yet we now have Humana/Walmart and CVS/Caremark cards. And with preferred networks (a market manipulation if I ever saw one) patients are forced to drive up to 20 miles just to find a pharmacy to fill their prescription. True competition should allow for any pharmacy network to contract with a plan if they so choose. But to lock out certain chains is the epitome of market manipulation. Let Grandma decide where she wants to go to be cared for, not CMS and its PBM friends. Part D savings and satisfaction for patients are more a result of the level of service provided by just the people Part D is beginning to lock out.. As Mr Keegan points out, Spatz glosses over the support that some of these changes would accomplish. Think how absurd it is for Mr Spatz to suggest that counseling Part D patients about their medication adherence is not worthwhile. Individual members of MedPAC have noted that MTM can prevent re-hospitalization of patients, thus reducing costs to the system.

  3. Marc Graff, MD Says:

    Thank you for your thoughtful commentary. The distinction between efficacy and best fit for a patient is quite important. Certain antidepressants (for example) are far more sedating than others–thus two antidepressants may be equally efficacious but someone sleeping at his or her desk at work is not an optimal outcome for depressed patients. Further, the decision-making process by CMS (and I am deeply sympathetic to Jon Blum who probably has an impossible job on a good day) needs to have input from actual clinicians, from the specialties whose expertise is relevant. Human beings are not perfect spheres, or even rational actors, even if the modeling is therefore easier for CMS apparatchiks.

    Marc Graff, MD, DLFAPA, Board Certified in Psychiatry and Geriatric Psychiatry
    Member of Board of Trustee, American Psychiatric Association (commenting as an individual)

  4. John Greene Says:

    There are two fundamental issues: First, is constitutional. It is not the role of the federal agencies to rewrite law. All these issues were debated and scored and the conference report was clear. Second, to publish a 700-page regulation out of the blue for a program that has 90% beneficiary satisfaction and is 40% under budget strikes me as a solution in search of a problem. A reduction in access to drugs that are affordable doesn’t help beneficiaries or community pharmacists. This program works best when all sides are working together. Community pharmacists complained 10 years ago that they would be put out of business. That did not happen. People have the option of using a community pharmacists and many do and they spend money on other things. At the end day, the rule of law and the benefit that the law provides to millions of seniors rely on access to affordable medications is what is at stake and what I fought for over a decade ago.

  5. Michael Keegan Says:

    If Mr. Spatz is going to suggest that pharmacists signed the letter of 277+ interest groups opposing the proposed CMS rules, it would be far more intellectually honest to reference the number of pharmacists and pharmacy groups that have commented in support, particularly on the issue of preferred networks and/or Medication Therapy Management. Mr. Spatz also glosses over the fact that the four members of the Senate Finance Committee who did not sign the letter were Democrats who bucked their new committee leadership. That is not insignificant. Finally, the notion that CMS should scrap the proposed rule because of political concerns strikes me as an argument for doing nothing.

    This issue has been enveloped into a larger narrative about the Affordable Care Act (some of the talking points are almost exactly the same) so this proposed rule has taken on larger political significance, as has the involvement of large special interests. Shelving the proposed rule and starting over again solves nothing, other than rewarding the well-heeled interest groups; there is no new data that will come to light or underlying facts that would call into question the justification for the new rules. Shelving the rules would merely reward those who can engineer political circuses, and would weaken the agency’s rulemaking authority on politically-sensitive issues.

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