Trump administration looks to give private Medicare plans negotiating power on drugs

Insurers that participate in Medicare’s prescription drug program would be able to exclude certain drugs if prices rise faster than inflation as part of a new proposal from the Trump administration.

The proposal, announced Monday, is aimed at lowering prescription drug costs for seniors by giving Medicare plans leverage in price negotiations.

Currently, private Medicare health plans are required to cover all or "substantially all" drug in six "protected" classes, such as HIV treatments, antidepressants and cancer drugs, regardless of cost.

This gives pharmaceutical companies little incentive to make the drugs affordable, administration officials said.

"The lack of any ability for Part D plans to manage drugs in the protected classes has allowed the pharmaceutical industry to command high prices on protected class drugs in Part D, without patients getting a good deal," Centers for Medicare and Medicaid Services Administrator Seema Verma said in a statement.

Under the proposal, health plans would be allowed to exclude protected drugs with price increases that are greater than inflation, as well as certain new drug formulations that are not a "significant innovation" over the original product.

The proposal could save taxpayers $692 million over a decade, officials said.

"By bringing the latest tools from the private sector to Medicare Part D, we can save money for taxpayers and seniors, improve access to expensive drugs many seniors need, and expand their choice of plans," Health and Human Services Secretary Alex Azar wrote in a Monday blog post.

The proposal would also allow private Medicare plans to use two controversial policies called prior authorization and step therapy — requiring patients try cheaper drugs before turning to more expensive ones, regardless of what their doctor prescribes.

The proposal is sure to elicit significant pushback from the pharmaceutical industry. Patient advocacy groups were quick to argue such policies would restrict seniors’ access to medicine.

"Step therapy is unheard of in the treatment of HIV due to the danger of developing resistance to an entire class of drugs and potential side effects," the AIDS Institute said in a statement. "The Medicare Part D Program is working well for people living with HIV, and there is no reason to take these draconian actions."

The American Cancer Society’s advocacy arm also expressed concern with the proposal.

"The proposals aim to save the Medicare program money, but in their current form could actually have the inverse effect, raising costs in other parts of the program and likely resulting in tremendous cost-shifting to patients," said Chris Hansen, president of ACS’s Cancer Action Network

Administration officials pushed back on the argument of access, saying patients will be "in the driver’s seat."

"[I]t’s important to remember that if seniors don’t like a plan that takes advantage of these new flexibilities, they are in the driver’s seat. They have the option to choose a different plan that better meets their needs. These new tools will only become as common as beneficiaries want them to be," Azar said in the blog post.

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