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Drug Pricing Proposals

In May 2018, the Trump Administration released American Patients First, a blueprint to lower drug prices and patient out-of-pocket costs. The plan, which builds on a set of proposals released earlier this year as a part of the Administration’s 2019 budget, lays out actions the Department of Health and Human Services should take and includes a request for information from various healthcare stakeholders. The blueprint includes four key strategies for reform: improved competition, better negotiation, incentives for lower list prices and lowering out-of-pocket costs for patients. The most significant proposals would:

  • Grant new authority for the HHS Secretary to move certain Part B drugs into Part D where savings could be gained through negotiation with manufacturers
  • Mandate that 340B hospitals devote a portion of their drug savings to charity care.
  • Modify the way Medicare pays for Part B drugs, including tying reimbursement to inflation, reducing Wholesale Acquisition Cost (WAC) based payment from WAC plus 6% to WAC plus 3%, and changing the way Average Sales Price (ASP) is determined.
  • Implement cost-sharing reductions for low-income beneficiaries in Medicare Part D by requiring that plans apply at least one third of the rebates they receive from manufacturers to reducing the point of sale price for consumers.
  • Exclude manufacturer discounts from counting towards beneficiary out-of-pocket costs for individuals in the “donut hole” and establish an out-of-pocket maximum for beneficiaries in the Medicare Part D catastrophic phase.
  •  Allow up to five state Medicaid programs to jointly negotiate lower prices from manufacturers.
  • Speed up the development of generic drugs by cracking down on manufacturer’s ability to “park” generic drug applications with the FDA during an exclusivity period.

The American Patients First blueprint also included a request for information (RFI) asking stakeholders for feedback in the following areas:

Medicare Part B:

  • Changes to the Part B Competitive Acquisition Program.
  • Moving certain Part B drugs to Part D.
  • Requiring site neutrality for physician-administered drugs and between inpatient and outpatient settings.

 

Medicare Part D:

  • Requiring beneficiaries be told what their out-of-pocket cost will be prior to receiving a Part B drug or a Part D drug prescription, and whether lower-cost alternatives exist.
  • Restricting the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebates.
  • Imposing fiduciary duty for Pharmacy Benefit Managers (PBMs).
  • Evaluating use of manufacturer-sponsored drug copay discount cards.

 

340 Drug Discount Program:

  • Requiring “safety net” hospitals paid under Medicare Part B to use their 340B drug discounts to provide care to more low-income and vulnerable patients.
  • Changing the definition of “patient”, changing the requirements around contracted pharmacies or registering of child sites.
  • Preventing duplicate discounts.

In February 2018, the Trump Administration released its budget request for the fiscal year 2019. In addition to calling for $4.4 trillion in new spending the Administration’s budget includes several proposals for how the administration plans to reduce drug prices. Among them:

  • Changes to the Medicare Part D program including cost-sharing reductions for low-income beneficiaries, more formulary flexibility for plan development, and the requirement that plans apply at least one third of the rebates they receive from manufacturers to reducing the point of sale price for consumers. The proposal would also exclude manufacturer discounts from counting towards beneficiary out-of-pocket costs for individuals in the “donut hole” and establishes an out-of-pocket maximum for beneficiaries in the Medicare Part D catastrophic phase.
  • Modifications to the way Medicare pays for Part B drugs, including tying reimbursement to inflation, reducing Wholesale Acquisition Cost (WAC) based payment from WAC plus 6% to WAC plus 3%, and changing the way Average Sales Price (ASP) is determined.
  • A new mandate that 340B hospitals devote a portion of their drug savings to charity care.
  • New authority for the HHS Secretary to move certain Part B drugs into Part D where savings could be gained through negotiation with manufacturers.
  • A proposal to allow up to five state Medicaid programs to jointly negotiate lower prices from manufacturers.
  • New rules to speed development of generic drugs by cracking down on manufacturer’s ability to “park” generic drug applications with the FDA during an exclusivity period.

 

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