A Pricing Revolution: The Federal Offensive – Pharmaceutical Executive
Federal policy changes
CMS has continued to implement and propose Medicare and Medicaid policy changes that can affect prescription drug prices, primarily by increasing payers’ negotiating power.
Implemented policy changes
While the changes to Medicare policies in the last year are not groundbreaking, CMS continues to refine policy to maintain pressure on drug pricing. The most significant change was a large increase in the Part D cost share that manufacturers are responsible for in 2020. On average, the annual increase for a Part D drug is $873, which is due to an increase in the threshold for transition from the donut hole to catastrophic coverage of $1,250, from $5,100 to $6,350.
Recently implemented Medicaid changes also have had minimal effect on drug prices:
- Changes to Medical Loss Ratio (MLR) calculations – exclusion from MLR calculations of any amount retained by a PBM under spread pricing* and exclusion of all rebates and discounts, regardless of who pays them
- Uniform requirements for drug utilization – increased use of consistent formulary choices across pharmacy programs for both Prescription Drug Lists (PDLs) and clinical protocols
- Disclosure of drug product information for outpatient drugs – requirement that manufacturers disclose correct category classification for drugs with Medicaid rebate agreements or face penalties
Impact on pharma
The increase in a manufacturer’s share of Medicare Part D costs has the net effect of lowering Medicare costs and manufacturer’s revenue, making it a less profitable channel. To optimize brand value, pricing and contracting strategies will need to be evaluated across all channels.
Efforts to minimize spread pricing
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