CMS moves to reduce Part B drug prices: 5 things to know

CMS will give private Medicare Advantage plans more negotiating power over prices for Part B drugs, which are administered in physician offices and hospitals, in an effort to reduce spending, according to an Aug. 7 news release.

Here are five things to know about the new policy:

1. Under current regulation, Medicare Part B drugs are paid for at their cost and a 6 percent fee for physicians. CMS said this payment method does not encourage negotiation to reduce drug prices.

2. Beginning Jan. 1, 2019, private health insurers that cover about 20 million Medicare Advantage customers can make those members try cheaper biosimilar drugs before using more expensive treatments. This is known as step therapy.

3. Health insurers can negotiate more rebates and discounts with pharmacy benefit managers in exchange for not pushing patients into rival treatments with lower price tags, according to a Bloomberg report citing an interview with HHS Secretary Alex Azar.

4. CMS' new policy only affects new prescriptions, not customers already on a certain drug. Members who are assigned to a cheaper drug through the step-therapy process could seek an exemption or switch to a different health plan by March 31.

5. Under the policy, half of any savings would have to go back to Medicare Advantage members in the form of lower premiums. However, since 2019 rates are locked in, patients may get a gift card instead, according to Bloomberg.

"For the first time ever, we're going to unleash these plans, which are so good at negotiating, to try to get discounts on Part B drugs," Mr. Azar told the publication. "This is a very important change in terms of drug pricing as well as just in managing and modernizing how Medicare functions."

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