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The new model will test a new way to lower increasing drug prices for patients paying for drugs under Medicare Part B.
In a live broadcast held on Friday, November 20, President Donald Trump, alongside the Department of Health and Human Services (HHS) Secretary Alex Azar, MD, and Center for Medicare & Medicaid Services (CMS) Administrator Seema Verma, MPH, announced updates for the Most Favored Nation (MFN) Model, a new drug payment model through the Center for Medicare and Medicaid Innovation at the CMS that aims to lower Medicare Part B payments for certain drugs.1
The goal of the MFN Model is to grant Americans – particularly seniors – access to drug prices offered to other higher-income countries. According to a new study from the Office of the Assistant Secretary for Planning and Evaluation (ASPE), Americans may pay more than twice as much as patients in other higher-income countries for Medicare Part B drugs.2
The MFN Model, set to begin in January 2021 and operate for 7 years, will test a new way to lower drug prices for patients paying for drugs under Medicare Part B. “Medicare will now look at the price that other developed nations pay for their drugs, and instead of paying the highest price on the list – and we are substantially higher than any other country in the world – we will pay the lowest price,” Trump said in Friday’s briefing.3
CMS will test a payment method based on MFN Price for 50 Medicare Part B drugs and biologicals with the highest Medicare Part B spending, accounting for an estimated 73% of Medicare Part B drug spending. Rather than being paid the current average sales price plus 6%, participating physicians, hospitals, and ambulatory surgical centers will be paid the model payment for these drugs, which includes 2 parts: 1, a blended lowest price based on other higher-income countries and the average sales price, and 2, a consistent flat add-on amount per dose.2
"The current system creates incentives for drug manufacturers to price Medicare Part B drugs as high as they can in the US system because the program pays doctors more when they prescribe more expensive drugs, even when a lower cost, clinically-equivalent alternative is available,” Verma said in a news release.1 “The Most Favored Nation Model will lead to lower drug prices for seniors," she added.
The model builds upon the series of 4 executive orders signed in July and September of this year that address pharmacy benefit managers (PBMs) and the process by which they negotiate discounts at the expense of Medicare patients. The MFN Model also identifies other prevalent drug pricing issues, such as high out-of-pocket costs, price transparency, and boosting biosimilar competition.
In the briefing, Trump also announced the withdrawal of the Unapproved Drugs Initiative (UDI), a program from the FDA with the goal of providing the agency with more clinical data for unapproved drugs. Brian Harrison, chief of staff at HHS, said in a news release that while UDI was “well-intentioned, [it has] distorted markets and produced the unintended consequences of price spikes and drug shortages.”4
Verma praised Trump’s successes during his presidency in regard to making health care more affordable in the United States. “The administration has delivered real tangible results, premiums down in Medicare by 34%, the lowest in 14 years,” she said.3
Trump also asserted that the MFN Model has caused backlash from the pharmaceutical industry. Trump lauded himself for the success of Pfizer’s vaccine candidate and asserted that Americans “wouldn’t have a vaccine if it weren’t for me for another 4 years, because the FDA would never been able to do what they did, what I forced them to do.” He also accused Pfizer of delaying analyses of trial results until after the election in defiance of Trump’s MFN Model.
The MFN model could potentially deliver more than $28 billion in out-of-pocket savings for patients under Medicare Part B, according to Azar.3
Azar said in the briefing that the model will replace “a broken system of shadowing kickbacks that drove prices higher and higher…with upfront discounts in Medicare delivered straight to the patient at the pharmacy counter.”