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CMS to Use Step Therapy to try to Drive Down Drug Spending

Posted 08 August 2018 | By Zachary Brennan 

CMS to Use Step Therapy to try to Drive Down Drug Spending

The Centers for Medicare and Medicaid Services (CMS) late Tuesday announced plans to begin using what’s called step therapy to try to lower the spend on Part B drugs by about 20% in Medicare Advantage plans.

Step therapy in this instance is a negotiating tool whereby Medicare Advantage plans can require patients to use cheaper drugs ahead of other, more expensive competitors, potentially lowering costs.

“For the first time, CMS will provide Medicare Advantage plans — private health insurance plans that provide Medicare benefits to 20 million Medicare beneficiaries (a third of all beneficiaries in Medicare) — the option of negotiating for Part B drugs in a way that lowers costs and improves the quality of care,” CMS said in a statement.

Beginning 1 January 2019, Medicare Advantage plans will ensure patients newly prescribed a medicine receive the most preferred and cost-effective drug first, allowing patients to begin treatment with a biosimilar in some cases.

But whether this move will amount to significant savings remains to be understood.

Bernstein biotech analyst Ronny Gal said in a note to investors that the target of this action “appears to be biosimilars” but he’s “uncertain how effective this new policy would be in pushing biosimilars yet. Our impression is that this will not be a decisive change. (i) Medicare Advantage is not a very large segment of the market.”

But he also said, “The added financial incentive may prove sufficient to switch the MA segment of the market over to using biosimilars.”

Industry lobbying group PhRMA, meanwhile, was not happy with the move by CMS.

“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 group said in a statement.

On the other side of the coin, the Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers (PBMs), said in a statement that the announcement “to include greater use of PBM tools in Medicare Part B through Medicare Advantage Prescription Drug Plans is an important step toward reducing costs for the program and beneficiaries.

“Some of the highest priced drugs are found in Medicare Part B, where PBMs currently don't play any meaningful role,” the PCMA said.

Categories: Regulatory News

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