CMS changes attitude toward Part D plan arrangements

March 10, 2014

CMS is proposing a modified interpretation of the existing non-interference provisions that would remove any limitation on CMS’ regulation of the relationship between pharmacies and plan sponsors.

Ned Milenkovich[Editor's note: This article went to press before CMS decided not to move forward with the proposed rule.]

The Centers for Medicare and Medicaid Services (CMS) has proposed new rules making significant changes to Medicare Part D, such as the “any willing pharmacy” contracting requirement, among other changes. The proposed rule was published in the Federal Register on January 10, 2014, and comments were due by March 7, 2014.

Non-interference provision

CMS is proposing a modified interpretation of the existing non-interference provisions. The new interpretation would remove any limitation on CMS’ regulation of the relationship between pharmacies and plan sponsors. As a result, CMS is able to propose several new requirements consistent with this new interpretation for relationships between plan sponsors and pharmacies.

 

“Any willing pharmacy”

CMS is proposing changes to its interpretation and application of two statutory provisions:

  • Ÿ The provision establishing the obligation of plan sponsors to contract with “any willing pharmacy”

  • Ÿ The provision giving plan sponsors the flexibility to create tiered pharmacy networks, with a lower cost incurred for drugs dispensed at certain network pharmacies.

Previously, plan sponsors and “preferred” pharmacies could establish contracts containing a lower cost-sharing obligation for covered Part D drugs. CMS now intends to require plan sponsors using a tiered pharmacy design to develop two sets of contracting terms and conditions, “standard” and “preferred,” for every type of similarly situated pharmacy.

In addition, pharmacies offering preferred cost-sharing must meet a negotiated price “ceiling,” which may not be more than the lowest negotiated price - the “floor price” - established by the plan sponsor. CMS also intends to cap the number of cost-sharing levels in plan benefit designs.

   

Mail order

CMS is proposing new requirements on mail-order pharmacies that would limit plan sponsor mail-order incentives. These include:

  • Ÿ Mail-order cost-sharing that is more on par with retail pharmacy cost-sharing

  • Ÿ Mail-order dispensing standards that would require dispensing to take place within three to five business days after receipt of the prescription

 ÂŸ Lower negotiated prices for all drugs at mail-order pharmacies offering preferred cost-sharing and expanded access to existing preferred cost-sharing networks. In this regard, CMS has stated that “most PBMs own their mail-order pharmacies, and we believe their business strategy is to move as much volume as possible to these related-party pharmacies to maximize profits from their ability to buy low and sell as high as the market will bear.”

 

“Protected class”

CMS is proposing criteria for determining classes of Part D drugs that are of “clinical concern” as required by the Affordable Care Act. The two criteria to identify those Part D drug classes that require additional protections are:

  • Ÿ Hospitalization, incapacity, or death are likely to result if access to a drug does not occur within seven days of presentation of the prescription for dispensing

  • Ÿ More specific CMS formulary requirements would not be sufficient to ensure access to drugs necessary to treat the disease or condition.

For 2015, CMS proposes that anticonvulsants, antiretrovirals, and antineoplastics all meet both these criteria, and that plan-sponsor formularies must include all Part D drugs in these classes, and include antipsychotics as well, under a CMS exception authority. Immunosuppressant and antidepressant drugs will not qualify for such status in 2015.

 

Other changes

CMS is also prohibiting pharmacies affiliated with a plan sponsor from waiving cost-sharing obligations under the plan’s benefit offering. In addition, more restrictive standards for new plan sponsors have been introduced, by which demonstrated capability to administer prescription drug benefits based on past experience will be required.

Ned Milenkovichis a partner and head of the drug and pharmacy legal practice at Roetzel and Andress LPA. He is also a member of the Illinois State Board of Pharmacy. Contact Ned at 312-582-1676 or atnmilenkovich@ralaw.com.