Most-favored nation model for Medicare Part B drug reimbursement ‘designed to fail’
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A new Trump administration policy aimed at lowering drug prices for Medicare beneficiaries has drawn criticism from the medical community, especially those in the oncology field.
The policy, known as the most-favored nation (MFN) pricing model, would alter CMS reimbursement for 50 drugs and biologicals that account for the largest share of Medicare Part B spending, including 38 commonly prescribed cancer drugs.
The MFN model — announced in November by outgoing HHS Secretary Alex M. Azar II — would apply to all Medicare Part B fee-for-service payments. The announcement followed an executive order signed Sept. 13 by President Donald J. Trump to align certain Medicare drug prices with the lowest cost of a drug sold to any country in the Organization for Economic Co-operation and Development that has a “comparable per-capita gross domestic product.”
However, implementation is being blocked in federal courts by interests that include the pharmaceutical industry, health care professionals and local governments.
Despite widespread agreement that escalating drug costs are a problem in the United States, experts with whom Healio spoke agreed the proposed MFN model is both flawed and destined for failure. The model would do little to lower the price of the most expensive drugs and instead would limit cancer care options for both clinicians and patients, they argued.
“Addressing high health care costs — especially in oncology — is necessary, but the MFN model doesn't take into account the negative effect the proposal will have on patient care,” according to Kristin M. Ferguson, DNP, RN, OCN, senior director of cancer care delivery and health policy with the Association of Community Cancer Centers. The association — the primary plaintiff in one the cases against HHS — was granted a temporary restraining order to block implementation of the rule on Dec. 23.
Inside the MFN model
The proposed MFN model would replace the current Medicare Part B reimbursement system that pays for physician-administered drugs at the manufacturers’ average sales price, plus an add-on payment based on 6% of that price.
A fact sheet published by CMS stipulates the proposal would lower prescription drug costs by paying no more for high-cost Medicare Part B drugs and biologicals than the lowest price that drug manufacturers receive in other similar countries. The MFN model would pay providers a flat add-on amount for each dose of an eligible drug instead of a percentage of each drug’s cost. This would eliminate the link between the drug cost and add-on amount.
“The current system creates incentives for drug manufacturers to price Medicare Part B drugs as high as they can in the U.S. system because the program pays doctors more when they prescribe more expensive drugs, even when a lower-cost, clinically equivalent alternative is available,” Seema Verma, CMS administrator, said in an HHS press release. “The [MFN] model will lead to lower drug prices for seniors.”
The HHS maintained that the MFN model would help lower drug prices by ending “foreign freeriding” and promoting competition through increased use of biosimilars.
The model theoretically could lower drug prices if it were carefully designed and enacted in accordance with standard regulatory procedures, according to Stephen Crystal, PhD, director of the Center for Health Services Research at the Rutgers Institute for Health, Health Care Policy and Aging Research. However, Crystal said the proposal was cobbled together so hastily that it ensured the model would have no future.
“I think this was a proposal that was put together in a way that was designed to fail,” Crystal said. “This policy seems to be designed in such a way that the administration, CMS and HHS knew it would be enjoined by the courts.” The MFN proposal was vague on its implementation and has led to a quick response in terms of legal action, Crystal said.
The model had an effective date of Jan. 1 despite a comment period that ends Jan. 26. Implementation has been blocked by federal courts. A court in Maryland issued a temporary restraining order, and courts in New York and California granted preliminary injunctions.
The clinician’s perspective
Some in the medical community have voiced concerns that the MFN model would place responsibility on clinicians and clinics to shop around for the best prices on the most expensive and commonly used drugs, many of them cancer treatments. This could lead certain cancer care clinics to stop offering therapies rather than provide them at a loss.
The new reimbursement scheme would also apply to several medical specialties beyond oncology and covers some of the most often used drugs for rhematic diseases, including rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis and osteoporosis.
The MFN model was never intended to work, according to Ted Okon, MBA, executive director of the nonprofit advocacy organization Community Oncology Alliance.
“It was a political gambit so that Trump could say he tried to do something about drug prices before leaving office,” he told Healio.
Okon said the proposed policy was “irresponsible,” adding that those within the administration, CMS and HHS who helped craft the policy must have been aware it would lead to legal challenges.
“In the 20 years that I have been advocating for [patients with cancer], I have never seen a proposal or piece of legislation that would adversely impact patients like this one,” Okon said. “We are not talking about treatment for sore throats or coughs; we are talking about cancer and other serious diseases that are treated with infusible Medicare Part B drugs. This will lead to deaths, and this isn't hyperbole. This is a fact.”
The issue with the MFN model is that it does not lower the price of the drugs but instead lowers reimbursement to clinics and providers, according to Ferguson.
If practices are unable to renegotiate the prices they pay for drugs, then providers may continue to pay the same prices but receive less reimbursement. At some point they may be unable to provide certain drugs included in the MFN model to patients if they are reimbursed for less than what they paid for the drug, Ferguson said.
“The patient may have to go to another clinic that can afford to provide the drug or potentially not receive it at all,” she told Healio. “The impact of the model on patient care and access to these drugs is unknown, and it has not been adequately investigated.”
Because the model places the work of lowering drug prices on clinics and providers, it would be especially unwise to implement it in the current climate, Ferguson said.
“That administrative burden during the COVID-19 pandemic would be extremely challenging given all of the other challenges that the health care industry is facing,” she said, adding that such a move would take resources away from other areas of patient care.
“If reimbursement is a concern, it is possible that clinics will look at other avenues of cost savings, which could affect aspects of patient care such as social work, transportation services, nutritional and financial counseling — the types of things that are not traditionally reimbursed by Medicare but are essential to the coordination of care for patients,” she added.
Most countries with government-run health care regulate the price of drugs and purchase them as a single buyer with larger purchasing power, rather than at the clinic or health care system level, as in the U.S., according to Clifford A. Hudis, MD, FACP, FASCO, CEO of ASCO.
“There the government simply sets an acceptable price,” he told Healio. “This proposal does not actually attack the problem but instead puts a financial squeeze in place that they hope and assume will ultimately lead to lower drug prices.”
The proposed policy can force clinicians to choose between best available, evidence-based care and what they can afford to deliver, Hudis said.
Ferguson, Hudis and Okon all highlighted an analysis from CMS, published in the Federal Register, that counts on a 19% decrease in appropriate utilization of drugs in the MFN model by year 4 after implementation as perhaps the most disturbing aspect of the proposal.
“For ASCO the real problem with the MFN model isn't the money, it’s the immediate consequence of expected denial of care for up to 20% of Medicare beneficiaries,” Hudis said.
A secondary issue, he added, is that some practices will not be able to handle the financial losses and eventually will go out of business.
“I've never seen a public policy that purports to be for the public good but overtly expects to limit access to appropriate care,” Hudis said.
Okon said the policy “holds oncologists and their patients as hostages” instead of having CMS negotiate with manufacturers for closer-to-international prices.
“The bottom line is that oncology providers would need to decide between losing money each time they provide one of these drugs — and risk the eventual closing or selling of their practice — or referring patients to other facilities that will provide the drug to Medicare patients,” Okon said. “If you need to refer [many] of your Medicare fee-for-service patients to another facility, then you are going to be out of business anyway.”
In addition, smaller and rural cancer care providers would consider shuttering their cancer care programs because they can't take advantage of discounts that larger facilities receive when negotiating drug prices, according to Okon.
Okon said the model is unfeasible and “puts the provider in an untenable position in the hope that the pharmaceutical industry will somehow react and lower its prices.”
A changing political landscape
Prior to the Georgia Senate elections and the Jan. 6 riot at the U.S. Capitol building, Crystal said he would have predicted little cross-aisle cooperation on drug cost policy in the new Congress. And although the MFN proposal in its current form is dead on arrival in his opinion, Crystal said the idea of using international prices to guide CMS reimbursement and lower drug costs could receive bipartisan support.
Crystal, who has testified before Congress on reforms to lower drug costs, said the most important change needed is to allow CMS to negotiate drug prices directly with the manufacturers.
“One of the fundamental reasons why we pay such high drug prices compared with the rest of the world is because we fracture the buying power into many, many little pieces,” he told Healio.
“Physicians should be out of the loop altogether,” he added. “We should not be paying physicians for drugs; we should be paying physicians for their services.”
The MFN model lacks consistent principles because it avoids having the government directly engage manufacturers on drug prices but expects to benefit from the cost savings of government-negotiated prices elsewhere, Crystal said.
Hudis agreed the issue of controlling drug costs is nonpartisan. He anticipates that the MFN model will be re-approached under the administration of President-elect Joseph R. Biden Jr.
“Having had the good fortune of working with then-Vice President Biden at the end of the Obama administration and knowing his personal, passionate advocacy for improving cancer care, I believe there will be an opportunity for very informative discussions with the new administration to come up with potential solutions that achieve the simultaneous goals of driving better access to quality care while also controlling the cost of drug prices,” Hudis told Healio.
Okon said the prospects for implementation of the MFN model are bleak at best, noting a current nationwide injunction against the final rule's implementation resulting from the pending federal case in California.
“I can't imagine the Biden administration will try and fight for this policy by appealing it, so I would expect it will pull this rule,” Okon said.
Okon noted that current House legislation seeks to peg U.S. drug prices to international prices and that Biden has expressed some interest in exploring such a model.
"However, if they opted for a reference-pricing scheme, it would likely come through legislation and not executive action,” Okon said.
Crystal — the health care policy expert who advocated for CMS’ ability to directly negotiate drug prices — agreed with Okon’s analysis.
“If the policy is that drug prices should be determined by negotiations between governments and drug providers, then why outsource the function to other countries?” he told Healio. “It is preferable to take the responsibility to negotiate ourselves, and that probably requires legislation.”
References:
CMS. Most Favored Nation model. Available at: https://innovation.cms.gov/innovation-models/most-favored-nation-model. Accessed Jan. 13, 2021.
CMS. Trump administration announces prescription drug payment model to put American patients first [press release]. Available at: www.cms.gov/newsroom/press-releases/trump-administration-announces-prescription-drug-payment-model-put-american-patients-first. Accessed Jan. 13, 2021.
Department of Health and Human Services. Most favored nation (MFN) model. Federal Register. Nov. 27, 2020. Available at: https://www.govinfo.gov/app/details/FR-2020-11-27.
For more information:
Stephen Crystal, PhD, can be reached at scrystal@ifh.rutgers.edu.
Kristin M. Ferguson, DNP, RN, OCN, can be reached at kferguson@accc-cancer.org.
Clifford A. Hudis, MD, FACP, FASCO, can be reached at American Society of Clinical Oncology, 2318 Mill Road, Suite 800, Alexandria, VA 22314.
Ted Okon, MBA, can be reached at tokon@coacancer.org.
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