Moving Forward From Medicare Part D Rebate Reform: Pricing Transparency and What it Means for Patients, Providers, and Life Sciences Companies
Last week’s announcement from the Trump administration that it was abandoning its Medicare Part D and Medicaid rebate reform efforts was a surprise but the debate over point-of-sale (POS) discounting and drug pricing transparency more broadly is just getting started. Indeed, market factors are pointing to ever increasing patient access to drug price information to drive shared decision making with providers, in addition to tangible POS pharmacy savings. The commercial payer market continues to advance POS discount programs for more patients making it increasingly necessary for the life sciences industry to understand and adapt to this trend in the context of the broader pricing transparency debate. Beyond POS discounting, the life sciences industry will also need to evolve their education and outreach to providers and patients in a world with more pricing transparency.
A primary driver of the recent pricing transparency policy efforts at both the state and federal level has been increasing patient exposure to costs for drugs due to growth in high deductible health plans and cost sharing. Numerous policy levers have been contemplated by the Trump administration and state legislators to reduce patient financial stress associated with their care. The failed Medicare Part D rebate reform aimed to reduce patient costs by passing confidential rebate savings negotiated by PBMs directly to patients at POS, lifting the veil. Transparency has also been viewed as a mechanism to hold the life sciences industry accountable for their pricing decisions while simultaneously increasing patient access to tools that could allow cost to feature more prominently in decisions about care. This will lead to increasing patient understanding of their cost burden and will influence how patients and providers will be making value determinations about care. 56% of U.S. physicians say their patients’ cost sensitivity has increased in the past year, highlighting the importance of addressing patient concerns. Many patients desire more support in understanding health costs and what they can do about them.
While many of the pricing transparency efforts at the federal level can be traced to the Trump administration’s blueprint to lower drug prices (e.g. the late POS rebate rule in Medicare, the direct to consumer advertising wholesale acquisition cost (WAC) inclusion rule blocked in federal court, or pricing disclosures to patients in Part D) some important efforts are driven in whole or in part by the market such as commercial payer POS discounts and the increasing use of real time benefit tools (RTBTs) for patients and providers. The market has begun to respond to patient sensitivity to price and the provider need to manage patient concerns about cost with RTBTs that allow review of lower-cost alternative therapies at the point of prescribing that may result in lower costs and improved medication adherence. It can be expected that these areas will continue to grow in importance in the future and are examined in more detail below.
Growth in POS Discounting
DRG proprietary analysis shows that POS discounting has increased substantially over the last two years and now accounts for approximately 15% of the commercial health insurance market. POS discounting in the commercial market is more prevalent with fully insured plans and ranges in methodology approach from flat discounts (government plan sponsors) to category level pass through. This growth has been led by UnitedHealth Group and Aetna, which have expanded their POS footprints recently, adding POS discounting to their respective fully insured businesses starting in January 2019. Citing success of this expansion, UnitedHealthcare is now requiring new self-funded employer customers to use POS in their plans starting in 2020. UnitedHealthcare noted average prescription cost savings of $130 per prescription with an increase in adherence of 4-16%. These initial programmatic successes support further organic POS growth in the commercial space.
In Medicare, CVS offered a Part D plan for 2019 that includes a POS rebate component. However, uptake of that option proved to be low. Without some government intervention such programs will not likely progress.
Real Time Benefit Tools
As noted earlier, RTBTs offer a platform for providers to begin to have cost conversations with patients. There are several RTBTs currently on the market, either developed by payers, EHRs, or companies solely focused on bridging payer data with provider workflows. The Centers for Medicare and Medicaid Services (CMS) has specifically mandated the use of RTBTs in Medicare Part D beginning January 1, 2021. Every Part D plan will be required to adopt at least one RTBT capable of integrating with at least one provider electronic prescribing system. The CMS mandate will help to speed increased utilization of these tools across the market.
Future of Transparency Efforts
In addition to POS discounting and RTBT trends discussed above, Medicare Part D inclusion of drug price increase and lower cost therapeutic alternative information in monthly explanation of benefits (EOB) notifications for January 1, 2021 and the CMS prohibition of gag clauses in Part D pharmacy contracts will increase Medicare beneficiaries’ empowerment to address cost of care with their providers. State legislatures also continue to advance legislation that requires certain drug manufacturer disclosure obligations, some with associated penalties for failure to report. These efforts have potential to limit some pricing increases, potentially benefiting patients. From a patient access perspective, state legislatures have also been looking closely at curbing payer copay accumulator programs that prevent manufacturer copay assistance from counting towards patient cost sharing burden. Those efforts aim to minimize the impact of copay accumulators in the commercial market.
With the rebate rule off the table, the Trump Administration is likely to increase focus on its proposed International Pricing Index (IPI) rule, which has seen increasing resistance from Congress, with Senator Chuck Grassley (R-IA), Chair of Senate Finance Committee, recently expressing his opposition to IPI. The proposed IPI model would link Medicare Part B reimbursement rate to a basket of international drug prices.
Implications and Strategic Considerations for Life Sciences Companies
An opportunity exists for life sciences companies to reassess their educational offerings for both providers and patients around the implementation of both POS discounts and RTBTs. Patients and providers will increasingly be engaged in balancing value at the individual level. It is important too, to remain aware that patients may have varying access to these tools based on their insurance coverage. Additionally, for Medicare Part D, the addition of alternative therapies to EOBs based on cost for January 1, 2021 should be considered.
For providers using RTBTs, it will be important for them to understand the system capabilities and how they can assist with their existing workflow. The RTBT will enable cost conversations that may not otherwise happen and based on pricing may help to advantage certain products that may not otherwise be considered.
For patients using RTBTs, it will be important for patients to know these tools exist, that they can help them save money, and that they can inquire about them. Such tools would likely help patients adhere to their prescribed medications by mitigating costs.
As more commercial payers adopt both POS discounts and RTBTs, it will be important to track uptake and evolve product strategies based on both advantages and disadvantages faced by products if favored or disfavored by these market dynamics.
DRG is continuing to monitor the many facets of the evolving pricing transparency landscape and will be releasing a series of posts that delve deeper into some of the issues flagged here.
DRG Consulting is a leading insights, analytics, and advisory services business focused on helping life sciences companies to advance innovations and navigate the complex global healthcare environment.
Authors: Brian Corvino, Managing Partner, DRG Consulting and Jon Larsen, Policy Practice Lead, DRG Consulting