The Trump administration is trying to overhaul some providers’ payments for outpatient drugs in six weeks as it makes a last-ditch attempt to finalize drug-pricing policies that have languished in regulatory limbo.
A model through the Center for Medicare and Medicare Innovation announced Friday would require mandatory participation from healthcare providers starting Jan. 1, 2021, though there are several categories of exceptions. The model would change providers’ payment for administering drugs from a percentage of a drug’s average sales price to a flat fee.
The Trump administration’s international reference pricing plan is limited to setting reimbursement for outpatient drugs, not pharmacy drugs as the administration had previously threatened. The model’s effective date gives providers only six weeks to prepare.
The model is mandatory and nationwide, which some conservatives said is outside the scope of CMMI’s authority.
Instead of paying drugs’ average sales price, Medicare will now also factor in a “most-favored-nation” price determined by finding the lowest price a drugmaker offers in certain Organisation for Economic Co-operation and Development member countries. The international price would carry heavier weight in the formula over a four-year phase-in period.
Providers are now paid a percentage of a drug’s average sales price to administer Part B drugs, which some have criticized as incentivizing high drug prices. The model would replace this method with a flat add-on fee.
Participation would be mandatory for healthcare providers with some exceptions, including cancer hospitals, children’s hospitals, ambulatory surgical centers, critical-access hospitals, rural health clinics, federally qualified health centers, and Indian Health Service facilities.
The model will eventually include the top 50 drugs that make up Medicare Part B spending.
Drugmakers are likely to sue to stop the actions, and Trump admitted as much during a speech on Friday.
“I presume they’ll sue, and it is a suit that they should never be able to win,” Trump said.
The most-favored-nation policy could be especially vulnerable on regulatory grounds because the administration skipped straight from a regulatory draft to an interim final rule, even though an intermediate process was under White House review for more than a year. Legally, an agency has to find that it has “good cause” to issue a final rule without first publishing a proposed rule.
President-elect Joe Biden has not expressly endorsed international reference pricing plan like Trump is proposing, but Biden has advocated for an independent board to assess fair prices for drugs without competition. Those assessments would include pricing data from other countries.
“I hope they have the courage to keep it, because the powerful drug lobby, Big Pharma, is putting pressure on people like you wouldn’t believe,” Trump said Friday, intimating he hopes the Biden administration keeps the policy, despite Trump not yet conceding that he lost the election.
Friday was the last business day the Trump administration had to ensure the regulations it is issuing take effect before Inauguration Day.
Drug rebate reform
The Trump administration also moved forward with a policy prohibiting pharmacy benefit managers from retaining rebates paid by drugmakers. This rule applies to the Medicare Part D program.
However, rebates offered to plans that are “contingent on formulary placement” would still be allowed.
Insurers and pharmacy benefit managers have balked at the policy, as it would expose the amounts of rebates they receive from drugmakers and redistribute money they use to keep premiums steady.
The rule would go into effect in 2022.
Drugmakers support and have actively lobbied for rebate reform, but PBMs said they would sue to stop the rule from taking effect.
“PCMA will explore all possible litigation options to stop the rule from taking effect and destabilizing the Medicare Part D program that millions of beneficiaries rely on,” said Pharmaceutical Care Management Association CEO JC Scott.