Policy, Pricing

Trump administration opens the door to lower drug prices as Medicare Advantage plans are pushed to step therapy approach

The Trump administration has taken another step towards lowering drug costs for consumers, this time aiming at the millions of members in Medicare Advantage plans.

Under new rules announced late Tuesday, the administration is giving these plans the right to set up what’s called step therapy plans for physician-administered and other Part B drugs. These plans, commonly used among private insurers, mandate that members use the least expensive drugs available for their conditions before moving on to pricier therapies if needed.

The move came just hours before President Donald Trump told a gathering of business executives Tuesday night that he was prepping an announcement next week that would bring down drug prices “really substantially.” That gathering reportedly included J&J CEO Alex Gorsky, who jumped off of one of the president’s business advisory groups after a controversy brewed up over Trump’s comments regarding a white supremacist rally in Virginia.

As an example of the new Medicare approach, the government says that step therapy plans — which should roll out January 1 — can start requiring members to use less-expensive biosimilars. And half of the savings are intended to be passed on to members.

“For the first time ever, we’re going to unleash these plans, which are so good at negotiating, to try to get discounts on Part B drugs,” said HHS Secretary Alex Azar in an interview with Bloomberg. “This is a very important change in terms of drug pricing as well as just in managing and modernizing how Medicare functions.”

But advocating step therapy approaches with generic or low-cost preferences is not necessarily the same thing as leveraging lower prices.

Azar and Trump have wrestled commitments from a long lineup of major biopharma companies to hold back on any further price increases until at least the end of this year. That effort was mocked, though, after many of these companies had already pushed through price increases that were already planned for 2018. And Democrats have been pushing the administration to support more aggressive approaches to allowing Medicare to create formularies to negotiate for lower costs.

According to the statement, this new approach at Medicare is available only for newly prescribed drugs.

“Under the President’s leadership, for the first time ever, CMS is bringing negotiations to physician-administered drugs and delivering on our promise to lower drug prices for patients,” said CMS Administrator Seema Verma in a prepared statement. “For too long, Medicare Advantage plans have not had the tools to negotiate a better deal for patients. Today we begin lifting those barriers so plans can use private-sector tools to drive down the cost of expensive drugs while also offering new care coordination and drug adherence programs, to ensure that patients are getting high quality care at lower cost.”

It’s not sitting well with the top players, though. The industry trade group PhRMA swiftly pushed back against the administration’s move.

“PhRMA has serious concerns with the new CMS guidance regarding Medicare Advantage coverage of Part B medicines and the implications for patients suffering from complex conditions. Step therapy will delay many patients’ access to medicines they need, interfere with the patient-physician relationship and increase burdens on physicians to comply with new, more complicated requirements. The bottom line is this guidance prioritizes the interests of middlemen while increasing out-of-pocket costs for some patients.”

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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