On November 20, 2020, CMS released a blockbuster proposal to national reprice Part B drugs according to international price metrics (aka Most Favored Nation Status, or MFN). Response from the biopharma industry was swift and resulted in a major legal filing by December 4. The Medicare policy facts are pretty bizarre and I'll both lay out the key facts and provide some fascinating backstory in this blog.
- There will be numerous ongoing legal motions and injunctions. CMS home page for this project should give the latest status. Here.
- January 21: Personalized Medicine Coalition comment here.
- February 19: Liz Fowler tapped to head CMMI here.
- (Retro to December): See an excellent review at McDermott on MFN, here.
- This is a comprehensive review that includes comparisons to Eurozone policies.
- See a March 2, 2021 article in JAMA, Kesselheim et al., here.
What CMS Did on November 20
CMS used its authority (from SSA 1115A, part of the Affordable Care Act) to create new demonstration products. It's used this authority dozens or hundreds of times. In this case, CMS asserts it can rapidly create a nationwide demonstration program that will last for years, and totally reconfigure drug pricing policy under Part B (e.g. intravenous drugs, chemotherapy, etc). In fact, SSA 1115A does create the Center for Innovation (aka CMMI) and allows it waive any part of Medicare law for the purpose of demonstration projects. The law is brief and doesn't state any limits on the duration of a demo (e.g. 6 months versus 999 years) or the scope (3 metropolitan areas versus all 50 states) or the project content (e.g. tweaking a small rule as a pilot versus raising the Medicare age to 75).
- See the CMS fact sheet here.
- CMS calls this the PDPM, Prescription Drug Payment Model, which doesn't capture the fact it is Part B drugs only.
- However, the CMMI webpage it titled Most Favored Nation - here.
- See the CMS press release here.
- The proposal was released in tandem with an HHS report on drug price inflation here.
- See the November 27 Federal Register web page here.
- See the 80 page PDF here. 85 Fed Reg 76180-259, November 27, 2020.
- Yes, somebody was working the day after Thanksgiving.
- My understanding the rule doesn't change what manufacturers charge, just what CMS pays in compensation to hospitals or doctors for those patients who are fee for service Medicare patients.
- It doesn't affect Medicare Advantage except in that overall per-patient capitation for MA will slip downward as FFS payments are reduced.
A number of major stakeholders, including the Pharmaceutical Research and Manufacturers of America (PhRMA), the Association of Community Cancer Centers (ACCC), the Global Colon Cancer Association (GCCA) and National Infusion Center Association (NICA), filed a law suite against the CMS pilot on December 4.
- See ACCC press release here.
- See PhRMA here.
- You can download a legal one pager or the full case from the prior link.
- Full complaint PDF here.
- There are collateral motions like injunctions and restraining orders.
- See trade press:
Demo 3113, Complex Tests, Date of Service
As of 12/2020, HHS still has a guidance webpage for Pilot 3113, one dated January 28, 2011, one dated March 10, 2011. It refers to transmittal CR7278, Publication 100-19, Demonstrations, Transmittal 70. Here. CMS excluded tests that didn't have specific CPT codes, which left the advocates for this demo in the lurch, since proprietary codes (MAAA codes) or PLA codes...hadn't been invented yet.
Admittedly, the projects are supposed to be expected to not reduce health quality and not raise costs, which produces some scope limitations, but those are just guidelines for what the agency says it hopes to achieve in a demo.
However, there's a quirk in that the law says CMS may suspend or change (waive) any aspect of Medicare law "solely for purposes of carrying out this section with respect to testing models described in subsection (b)" where (b) refers to Pilots, not Extensions. I've seen CMS argue, somewhere in the Federal Register, that the law giving ability to waive law for pilot projects (b) implies it can also waive law for resulting permanent programs. However, as a non attorney, I find that reading hard to believe, see the law specifically says waivers can be SOLELY for the purpose of the section on pilot models "b." Expansion of models is law section "c". To me, a law that is "solely for [b] " is a law that does not include the adjacent "c." Of course, CMS could escape this problem by making the demo "b" phase 99 years long instead of a year or two, so the demo never faces finalization as expansion phase "c."
This proposed rule discusses the implementation of a new Medicare payment model under section 1115A of the Social Security Act (the Act). We propose the Part B Drug Payment Model as a two-phase model that would test whether alternative drug payment designs will lead to a reduction in Medicare expenditures, while preserving or enhancing the quality of care provided to Medicare beneficiaries. The first phase would involve changing the 6 percent add-on to Average Sales Price (ASP) that we use to make drug payments under Part B to 2.5 percent plus a flat fee (in a budget neutral manner). The second phase would implement value-based purchasing tools similar to those employed by commercial health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization. We believe this model will further our goals of smarter, that is, more efficient spending on quality care for Medicare beneficiaries.
The MEDPAC policy commission submitted a 13-page comment to CMS on 1/25/2021, stating it had "significant concerns about the structure and potential effects of the MFN model." Here. They add the MFN "manifests a number of serious flaws." They also note that basing the MFN on per-drug sales (for top drugs) could unfairly bias providers toward lower-volume drugs. For example, drugs A,B,C are in the same class and about the same price. Drug A is large enough in sales to trigger MFN, so its price is cut in half, but drugs B and C are not, and remain at the same high price.