CMS Releases Proposed Rule Regarding Changes to the Medicare Part D Program for 2015

On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to the Medicare Prescription Drug Benefit (Part D) Program. The proposed changes, such as the “any willing pharmacy” contracting requirement, could significantly impact how Part D Prescription Drug Plan Sponsors operate and interact with their contractors, beneficiaries, and the government. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014.

The Proposed Rule provides a new interpretation of the non-interference provision in the statute relating to the Department of Health and Human Services (HHS) relationship with drug manufactures, pharmacies, and Sponsors. Since 2004, this statute has been interpreted to extend to negotiations between any of those parties. However, if the Proposed Rule is implemented, the non-interference provision would be interpreted as to apply only to pharmaceutical manufacturer’s negotiations with pharmacies and Sponsors and would not apply to negotiations between Sponsors and pharmacies.

CMS also proposed a dramatic change to its interpretation and application of two statutory provisions: the provision establishing Sponsors’ obligation to contract with “any willing pharmacy,” and the provision allowing Sponsors to create tiered pharmacy networks. Historically, CMS has interpreted these two provisions as requiring Sponsors to include any pharmacy willing to meet the Sponsors’ “standard” terms and conditions in the Sponsor’s pharmacy network. Sponsors were still able to contract with a limited number of “preferred” pharmacies with alternate terms and conditions, such as lower cost-sharing obligations for covered Part D drugs. In the Proposed Rule, CMS suggests Sponsors who have “standard” and “preferred” pharmacies would be required to allow every pharmacy to have the opportunity to contract under the “preferred” terms and conditions, thus eliminating Sponsors’ ability to develop exclusive arrangements with select business partners. Furthermore, any pharmacy offering “preferred” cost-sharing would be required to meet a price “ceiling” established by the Sponsor, which must be less than the lowest price (the “floor price”) the Sponsor has with “standard” cost-sharing pharmacies. CMS also proposed that Sponsors require pharmacies contracting under the preferred terms and conditions to offer lower prices on all drugs in return for the lower cost-sharing.

CMS also proposed to create new criteria for determining categories of Part D drugs Protected Classes as required by Affordable Care Act (ACA) § 3307, as well as reduce the number of Protected Classes from six to four by CY 2015. CMS adopted two criteria to identify those Part D drug classes and categories that require protections beyond those offered by the Part D Program: 1) hospitalization, incapacity or death likely will result if access to a drug does not occur within seven days of the prescription being presented for dispensing; and 2) more specific CMS formulary requirements would not be sufficient to ensure access to drugs necessary to treat the disease or condition.

According to CMS proposes that anticonvulsants, antiretrovirals, and antineoplastics would meet both of the Protected Classes criteria, and so Sponsors’ formularies must include all Part D drugs in these three classes. Furthermore, even though antipsychotics did not meet both of CMS’s proposed criteria, CMS proposes to use its exception authority to create an exception to extend Protected Class status to antipsychotics for CY 2015. Conversely under the Proposed Rule, immunosuppressant and antidepressant drugs, both classes of which have been Protected Class designees since 2006, would not qualify for Protected Class status. This means Sponsors would not be required to include on their formularies every Part D drug in these classes, which has the potential to affect drug manufacturers, Plan Sponsors, Pharmacy Benefit Management Companies, pharmacies, and beneficiaries.

Other CMS proposals include a proposal to prohibit pharmacies that are affiliated with a Sponsor from waiving cost-sharing obligations under the plan benefit package, proposals for changes to mail order pharmacies, and a proposal to adopt more strict standards for new applicants to sponsor Part D Plans.

The Proposed Rule reflects several significant changes to prescription drug benefit administration especially with regard to the relationships between Sponsors, pharmacies, and CMS. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014. If you have questions regarding the Proposed Rule, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com