Medicare seeks to reduce the cost of medicines for people in Part D plans


January 7, 2022 – The Biden administration said this week that it intends to challenge insurance companies to provide better service to people enrolled in Health Care, including applying a discount to medicines covered by Part D more directly to their pharmacy costs.

The Centers for Medicare and Medicaid Services (CMS) on Thursday unveiled a proposed 360-page rule that requires many changes to the way insurers manage their federal contracts. This proposed rule, for example, would also require insurers to demonstrate that they have enough contracted medical professionals when they want to create new The advantage of Medicare plans or expand existing ones.

The rule also calls for greater accountability on how insurance companies spend Medicare money, including greater transparency of spending on additional benefits such as dentistry, sight, hearing, transportation, and meals.

With this proposed rule, CMS intends to strengthen the oversight and management of Medicare Advantage and use its powers to address drug costs, says Tricia Neuman, ScD, executive director of the Medicare Policy Program at the nonprofit Kaiser Family Foundation.

In an email exchange, Neumann said the rule shows the Biden administration is using its powers to cut drug costs as it works with Congress to try to pass the Build Back Better Act “which includes a series of policies to achieve lower drug prices.”

The proposed rule also addresses the key issue of the increased role of private insurers managing Medicare benefits. Much of Medicare is implemented through public-private partnerships, which require the CMS to monitor health plans that manage federal health benefits for people over 65 and people with disabilities.

According to estimates by the Kaiser Family Foundation, insurer-led Advantage plans involved more than 26 million people, or 42% of the total Medicare population last year.

“Strengthening protection for the elderly in Medicare Advantage plans is particularly important,” due to the large number of enrollments in these programs run by insurers, Neumann said.

Part D Discussions

Insurers also manage Medicare Part D’s overall medical benefit, which covers about $ 100 billion in annual drug purchases. There was significant bipartisan interest in changing the course of the discounts agreed under Part D of the program to help people pay for medicines purchased at pharmacies.

In late 2018, for example, the Trump administration sought comments on a policy that would require Part D plans to apply all discounts to prices they receive from online pharmacies at the point of sale, which would reduce costs for those enrolled in those plans.

Concerns about complex negotiations within the drug supply chain have been growing in recent years, especially with regard to the role of pharmacy benefit manager (PBM).

People enrolled in Part D who need medicines, especially expensive medicines, and small pharmacy owners miss out on direct savings from so-called direct and indirect compensation (DIR) fees. These include rebates from drug manufacturers, administrative fees above fair market value, price concessions for administrative services, legal settlements affecting Part D drug costs, pharmacy price concessions, drug costs related to risk-sharing or other price concessions, or similar benefits, CMS said in a draft rule.

Insurers and pharmacy benefit managers – acting as intermediaries between drug manufacturers and insurance companies – argue that channeling their drug cost savings into health plans results in lower premiums for those involved in Part D plans. But this approach means people in Part D of the plans “they end up paying most of the actual price of the drug” when they need the drug, the CMS states as a rule.

The proposed rule would require Part D plans to apply all discounts to the prices they receive from online pharmacies at the point of sale. CMS wants to redefine the agreed price as the base or lowest possible pharmacy payment, effective January 1, 2023. This policy would reduce out-of-pocket costs for people in Part D plans and improve price transparency and competition, CMS said.

This proposal quickly gained the approval of a Republican MP who has been fighting for years for changes in direct and indirect fees. In a statement, attorney Buddy Carter of Georgia, a pharmacist by education, said he was encouraged that CMS was taking action on the issue.

“The effectiveness of the rules has yet to be seen and more needs to be done to protect consumers from harmful PBM practices. “I hope this is the first of many steps that put patients ahead of PBM’s profits,” he said.

According to Carter, PBMs “exploit sick Americans to make more profit.”

“Nowhere in America should a patient choose between life-saving drugs and putting food on the table, but it is a choice that PBM forces them to make,” he said.

In a statement, the Pharmaceutical Benefits Managers Trade Group, pharmaceutical care management association, defended the current approach as part of a “value-based contracting in Medicare Part D.”

“We are currently reviewing the proposed rule,” JC Scott CEO said in a statement. “We look forward to working with CMS on ways to improve the use of value-based contracting instead of limiting this important tool.”

The rest key parts of the proposed rule include:

  • Greater oversight of third-party marketing organizations to prevent misleading marketing tactics for Advantage and Part D plans.
  • Clarification of requirements for contingency and emergency plans to ensure that users have uninterrupted access to necessary services.


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