Payers Question CMS’ Ability to Get Discounts Though Drug Price Negotiation

About 62% of payers in a recent survey believe patients will have lower out-of-pocket costs with provisions that have been put in place because of the Inflation Reduction Act. But 43% also don’t think that the Centers for Medicare and Medicaid Services (CMS) will be able to negotiate lower Medicare Part D drug prices, finds a survey of payers by Magnolia Market Access, a market research consultant for pharmaceutical companies.

The elements of the IRA expected to lower patients’ costs include a cap on out-of-pocket spending for Medicare Part D at $2,000 beginning in 2025. In following years, the cap would be indexed to inflation. Already in effect is a $35 out-of-pocket cap on each month’s supply of covered insulin, elimination of deductibles for covered insulin and the elimination of out-of-pocket costs for recommended adult vaccines covered under Part D. This year, the 5% coinsurance in the catastrophic phase has been eliminated.

These limits on out-of-pocket spending will save 18.7 million Medicare Part D enrollees about $400 per year, according to an analysis by the Department of Health and Human Services (HHS) last year.

Amanda Forys

But respondents from the Magnolia Market Access survey questioned the ability of CMS in to get bigger discount than they are already get. Plans that have a large of number of covered lives may be able to negotiate broader contracts with manufacturers, Amanda Forys, partner at Magnolia Market Access, said in an interview. “Some of the larger plans have more negotiation power than CMS so they question whether this is going to make things better for them.”

Magnolia Market Access conducted a survey of payers, including medical and pharmacy directors from regional health plans, PBMs, actuaries and industry experts. Interviews were also conducted with industry experts, including attorneys, economists and financial modelers. This survey, the third in series about the IRA, was conducted in the fall of 2023.

Related: Medicare Drug Price Negotiations to Move Forward

Medicare price negotiations for the first 10 drugs selected as required by the IRA are under way. CMS officials plan to meet with pharmaceutical companies up to three times during the spring and summer of 2024. New prices will take effect Jan. 1, 2026.

Among the plans that believe they can get a better price for prescription, respondents from the Magnolia Market Access survey said this was because of their stronger understanding of the market and their ability to leverage a significant number of covered lives.

The IRA also requires Medicare Part D plans to provide coverage for drugs and all dosage forms when the negotiated prices are in effect beginning in 2026. Plans are also required to provide a rationale for non-preferred formulary placement for the 10 drugs.

The Magnolia Market Access survey found that plans are mixed about how utilization management will evolve in light of the IRA. Of the 31% of plans that believe the IRA will significantly impact their organization’s utilization management tools, many anticipate that step edits, exclusions and prior authorization will increase. Plans plan to target a variety of drug classes for increased formulary management. In fact,

• 89% of plans in the survey said they would increase the number of products excluded from formularies;
• 85% said they would require step edits or generics first more frequently;
• 80% said they would increase management of high-cost specialty products;
• 81% said they would increase scrutiny of formulary exceptions; and
• 76% said they would increase management of high-cost orphan/rare disease products.

Respondents said the use of utilization management tools has been steadily increasing but Forys said that this year, there hasn’t been a huge shift in formularies.

Drug classes that are expected to be targeted for increased utilization management include oncology, cardiovascular disease, autoimmune and inflammatory and asthma and chronic obstructive pulmonary disease because these are expensive classes of drugs.

The survey also found that while biosimilars uptake has been slower to date, payers plan to begin to increase the use.

Plans in the survey said the use of utilization management changes will be in their Medicare plans but Magnolia Market Access executives believe some elements are likely to trickle into the commercial market plans.