Healio Special Report: Health Care and Politics

Healio Special Report: Health Care and Politics

August 10, 2021
6 min read

CMS nixes 'most-favored nation' pricing model for Medicare Part B

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CMS plans to rescind a Trump-era interim final rule that would have established a “most-favored nation” pricing model for Medicare Part B drugs, following months of lawsuits that saw the proposal stalled in federal court.

In a new proposed rule released over the weekend, CMS stated they would nix the would-be policy, which was formally introduced in November 2020 and slated to take effect Jan. 1. The proposal was later halted due to a nationwide preliminary injunction issued by the U.S. District Court for the Northern District of California on Dec. 28, 2020.

CMS plans to rescind a Trump-era interim final rule that would have established a “most-favored nation” pricing model for Medicare Part B drugs, following months of lawsuits that saw the proposal stalled in federal court. Source: Adobe Stock

“Given that the nationwide preliminary injunction precluded implementation of the [most-favored nation] Model on January 1, 2021, as contemplated, that multiple courts found procedural issues with the November 2020 interim final rule, and that stakeholders expressed concern about the model start date, we are proposing to rescind regulations added by the November 2020 interim final rule and remove the associated regulatory text at 42 CFR part 513,” the new CMS proposed rule reads, in part.

“If finalized, our proposal would allow us to take time to further consider the issues identified by commenters and would address the November 2020 interim final rule’s procedural deficiencies by rescinding it,” it later adds.

David Karp

The news was met with praise from David Karp, MD, PhD, president of the American College of Rheumatology, which had criticized the proposed policy in the past, stating the new pricing model would disrupt patient access and threaten the financial solvency of many practices.

“This is a great win for our patients whose denied access to essential medicines was a calculated part of the cost savings,” Karp said in a tweet. “Kudos to [ACR] volunteers and staff who worked on this. Now let’s work on saner policies that make medicine more affordable and available to all.”

The Would-be Policy

The initial CMS interim final rule stemmed from an executive order signed by then-President Donald J. Trump on Sept. 13, 2020, which included a mandate to test a “most-favored nation” pricing model for certain high-cost Medicare Part B and Part D drugs. The eventual interim final rule, posted in the Federal Register on Nov. 27, applied only to Medicare providers and suppliers who receive separate Medicare Part B fee-for-service payments for the model’s included drugs, with some exceptions.

According to a fact sheet published at the time by CMS, the rule would have lowered prescription drug costs by paying no more for high-cost Medicare Part B drugs and biologicals than the lowest price that drug manufacturers receive in other similar countries. In addition, the most-favored nation model would have paid providers a flat add-on amount for each dose of an eligible drug, rather than a percentage of each drug’s cost, removing the tie between drug cost and the add-on amount. However, there would have been financial hardship exemption for certain participants whose revenue is significantly affected by the most-favored nation model, CMS said at the time.

According to officials, the goal of the model was to reign in skyrocketing Medicare Part B drug costs and more closely align them with those paid in other comparable nations across the world.

In its new proposed rule to rescind this proposal, CMS acknowledged the current price imbalance under the present system.

“Medicare pays substantially more than other countries for many of the highest-cost Medicare Part B drugs that beneficiaries receive in an outpatient setting for which Medicare Part B allows separate payment,” read the new proposed rule, in part. “In many instances, Medicare pays more than twice as much for certain drugs as other countries do.”

Had it been enacted, the “most-favored nation” policy would have operated for 7 years, from 2021 to 2027, during which time CMS planned to monitor and evaluate its impact on patient access, program costs and quality of care.

Backlash and Lawsuits

The “most-favored nation” final rule was targeted almost immediately by several physician organizations, including the ACR, which argued that the would-be model, although commendable in its goal of reducing drug prices, would have made dramatic cuts to specialty providers like rheumatologists who administer Part B drugs. Reimbursement amounts providers would receive, based on international prices, would be much lower than the domestic prices providers in the U.S. would be subject to, they argued.

In addition, critics were skeptical that CMS’ proposal of an additional fixed payment — to cover the cost of procuring, storing, handling and administering these drugs — would sufficiently fill that gap.

“We’re happy that the current administration has abandoned this plan that was put in place by the former administration,” Karp told Healio Rheumatology. “From my viewpoint, there were three main problems with it: One, regulations in this country are created according to certain rules, and we and others did not feel that the rules were followed for the creation of this regulation, and ultimately that led to the federal judge halting the implementation of the regulation. But, more importantly, the regulation attempted to reduce prices in what we thought was the wrong way.

“We all agree that drug prices in this country are high — too high — for many of our patients to access,” he added. “However, there are many reasons for that, and one of them is the marketplace that American medicine lives in, including the marketplace for prescription medications, and that’s a very different marketplace that exists in other countries.”

Karp additionally argued that asking rheumatologists and other providers to subject themselves to price controls based on other countries’ marketplaces “doesn’t make sense,” considering their obligations to pay staff salaries that are based on the U.S. marketplace.

“Why would our physician offices be disadvantaged for providing essential medications?” he said.

“And the last thing, which is what really bothered me a great deal, was that, baked into the regulation, was the assumption was that patients would be denied certain essential medications, and that would result in cost savings, and that seems just downright cruel if you ask me,” Karp said. “I don’t know if I’ve ever seen a federal regulation where denying people access to life-savings medications, or life-altering medications, life-improving medications, is part of the calculus.”

Four lawsuits, filed in December 2020 while the public comment period on the final rule was still open, also took aim at the proposal: Association of Community Cancer Centers v. Azar, California Life Sciences Association v. CMS, Regeneron Pharmaceuticals v. HHS, and Community Oncology Alliance, Inc. v. HHS. On Dec. 28, 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction in the California Life Sciences case, which preliminarily enjoined HHS from implementing the new pricing model and the November 2020 interim final rule.

The lawsuits brought on by the Association of Community Cancer Centers and Community Oncology Alliance were then stayed due to the injunction. The U.S. District Court for the Southern District of New York later issued its own preliminary injunction in the Regeneron case, preventing HHS from applying the final rule to the company’s drug Eylea (aflibercept).

CMS received approximately 1,166 public comments in response to the November 2020 interim final rule. According to CMS, most of the comments expressed concern about the timing of the rule.

“We note that many commenters agreed with HHS about the urgency of addressing high prescription drug prices, but nearly all of the commenters expressed concern about beginning the model on January 1, 2021, including starting the model during the COVID-19 pandemic,” read the new CMS proposed rule.

What Now?

According to CMS, the government is currently taking other actions to reduce drug prices and improve access.

“On July 9, 2021, President Biden signed an executive order on promoting competition in the American economy that, in part, directs the secretary of HHS to take steps to lower the prices of and improve access to prescription drugs and biologicals,” reads the new CMS proposed rule. “HHS is exploring opportunities to promote value-based care for our beneficiaries; to address the high cost of Medicare Part B drugs, manufacturers’ pricing, and the resulting growth in Medicare Part B drug spending; and to modernize the Medicare program to improve the quality and cost of care for beneficiaries.

The document continues: “We will continue to carefully consider the comments we received on the November 2020 interim final rule as we explore all options to incorporate value into payments for Medicare Part B drugs and improve beneficiaries’ access to evidence-based care.”

According to Karp, the ACR will also continue working with CMS to find an alternative solution to high drug prices, although he said it would be inappropriate to publicly discuss any specific policies at this stage.

“We have a robust dialogue between the advocacy group, both staff and volunteers of the ACR, and CMS, and we are eager to talk with them about other ways that might lead to reduced prices,” Karp said.