The Centers for Medicare and Medicaid Services (CMS) creates rules that establish or modify the way its program is administered. Many of these rules aim to save CMS money or save its beneficiaries money. Some of these rules can also affect pharmaceutical manufacturers in a negative or a positive way.
CMS has recently finalized a rule that aims to save beneficiaries and pharmaceutical manufactures money. The rule will require that pharmacy concessions be passed through to Medicare beneficiaries at the point of sale and will go into effect in 2024.
Currently, pharmacies provide concessions or retroactive clawbacks to pharmacy benefit managers (PBM) or insurance plans after the point of sale that are aligned to performance goals. The problem is that this money does not directly benefit patients. The money is inappropriately benefiting PBMs and/or insurance plans.
The rule will lower the point-of-sale prices for Medicare beneficiaries and save them $26.5 billion. Pharmaceutical manufacturers will save indirectly under the rule because beneficiaries would progress more slowly to the Part D coverage gap in which manufacturers are required to provide discounts. Manufacturers are expected to save $16.8 billion over 10 years under this new rule.
This policy change makes it clear that CMS is getting serious about making changes to the way PBMs and insurance companies are incentivized, and are taking action to ensure beneficiaries directly receive savings. Many of these CMS proposed rules will affect manufacturers either positively or negatively. In this case, manufacturers will indirectly benefit from the change.
Another CMS rule that is on the table, but not yet finalized, is focused on reducing pharmaceutical single use vial wastage. This policy change could affect manufacturers negatively, or at least change the way they think about vial size and dosage. Manufacturers would be responsible for “rebates based on the discarded volume above 10% of the total allowed amount”. One analysis of 2020 wastage data showed that 39 drugs would be at risk for rebates and those manufacturers would need to pay $151 million in rebates. This rule is an attempt by CMS to force manufacturers to reduce vial wastage by creating additional vial sizes, adjust dosages, or create flat dosing that is not based on patient weight.
Manufacturers need to stay abreast of proposed and final CMS rules to determine how these rules could affect their business and determine how to mitigate the risk or turn the change into an opportunity. The policy environment is always evolving, which necessitates vigilance by manufacturers. Engaging with a strategic partner to identify policy threats or opportunities and create a plan of action is vital.