‘Tough to say’: Complications, guarded optimism surround Medicare price negotiations
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Following HHS’ blockbuster announcement of the first 10 drugs that would be subject to Medicare price negotiations, patients and providers alike have been looking forward to meaningful reductions in their costly treatments.
However, before those negotiated price reductions can take effect — in 2026 — myriad details and complications must be squared away. The role of the pharmacy benefit manager (PBM) rebate system, the approval and impending release of certain biosimilars, and what constitutes a “fair maximum price” for these drugs all must be considered and sorted in the coming months and years.
“It is tough to say what this might mean for drug costs and patient care,” Marcus Snow, MD, associate professor in the division of rheumatology at the University of Nebraska Medical Center, said in an interview. “I would hope that it lowers the prices and makes these medications more affordable for Medicare patients, but the market dynamics surrounding drug pricing are so complex at times that it is difficult to make any reasonable prediction.”
What is certain, however, is that the law could apply to a huge number of patients, including those with rheumatic diseases. Two of the drugs slated for price negotiation are etanercept (Enbrel, Amgen), indicated for patients with rheumatoid arthritis, psoriasis, or psoriatic arthritis, and ustekinumab (Stelara, Janssen) which is most commonly used in psoriasis, PsA, Crohn’s disease and ulcerative colitis.
This has led some rheumatology watchdogs, including Madelaine A. Feldman, MD, FACR, vice president of advocacy and government affairs at the Coalition of State Rheumatology Organizations, and founder and past president of the Rheumatology Alliance of Louisiana, to express guarded enthusiasm about future access to these drugs.
“Price negotiations on Part D drugs will help Medicare patients afford these medications as their cost share is based on the list price of the drug,” she said. “We never see list prices for Part D drugs go down, just increased price concessions from the manufacturer. In fact, this downward pressure on list prices of the self-administered drugs will also help employers who self-fund their employees’ health plans.”
However, despite the large potential impact, other experts are more cautious in their optimism. Like Snow, they cite unpredictable factors currently influencing pharmaceutical market dynamics, such as PBM rebates and the advent — and gradual release — of biosimilars.
However, there is also the matter of timing. As per the Inflation Reduction Act of 2022, the initial negotiated price reductions will not take effect until 2026 for drugs under Medicare Part D, while those who receive medications under Part B will have to wait until 2028 to benefit from any savings.
According to Allan Gibofsky, MD, JD, professor of medicine and public health at Weill Medical College of Cornell University, and attending rheumatologist at the Hospital for Special Surgery, in New York, the intervening time may seem like an eternity in terms of therapy advancements.
“We are talking about negotiations that will occur in this year or next but not take effect until 2026, pursuant to the act,” Gibofsky told Healio. “By 2026, the field will have moved forward given the availability of biosimilars.”
That said, the entrance of biosimilars into the market is not the kind of “given” that is likely to impact pricing immediately. As per a 2021 U.S. District Court decision, a biosimilar for etanercept will not enter the market until 2029. For ustekinumab, the settlement of a lawsuit between Johnson & Johnson and Amgen stipulates that the launch date for the J&J biosimilar product would occur “no later than Jan. 1, 2025.”
In addition, although the entry of adalimumab (Humira, Abbvie) biosimilars into the market has driven prices down, there is less certainty that the biosimilars for etanercept and ustekinumab will yield the same result. Ultimately, the Medicaid negotiation is likely to help improve access and reduce costs, but there are still several unanswered questions to consider.
‘Tough to prescribe’ drugs
According to Snow, the inclusion of etanercept and ustekinumab on the list of drugs eligible for Medicare price negotiation has the potential to improve access for medications that “have previously been tough to prescribe for Medicare patients.”
“For so many patients on Medicare, the cost of subcutaneous biologic medications is often a huge barrier to access,” he said.
Although Snow said he believes the combination of price negotiation and biosimilar availability will drive prices down, he also stressed that the “lack of transparency” in drug pricing in the United States makes it difficult to make any prediction with certainty.
That said, he resisted the temptation to blame pharmaceutical companies, PBMs or insurance carriers specifically.
“You could call out the whole process,” Snow said. “We need transparency across our system as far as drug pricing goes.”
However, Robert W. Levin, MD, past president of the Florida Society of Rheumatology, president of the Alliance for Transparent and Affordable Prescriptions, and associate affiliate professor of medicine at the University of South Florida, stated that PBMs in particular could wield great influence on the pricing structures for, and access to, etanercept and ustekinumab in the wake of expected lower prices.
“Formulary prices are often based on PBM rebates,” he said. “This government edict says we are lowering the price for these drugs. That, in turn, could lower the rebate. If CMS can make a rule that they have to be first-tier medications, then they will stay on the formulary, but they could also be moved down to tier 2 or 3 — or not covered at all — which would choke off access.”
Snow agreed and added that reimbursement for rheumatology medications can “differ drastically” based on cost sharing.
“When patients turn 65 and shift from private insurance to Medicare, it can be tough for them to continue etanercept because the costs go so high,” he said. “If we can lower the cost here it could have a huge benefit for patients and the ability of rheumatologists to best treat these diseases. But that is a big ‘if.’”
Layers of impending complications
Another layer of complication particular to ustekinumab is that the medication has two formulations, only one of which is self-administered and covered under Medicare Part D.
“This negotiation [taking effect in 2026] will only impact the self-administered formulation, which will fall under Medicare Part D,” Levin said. “Part B will not be covered. It is unclear what is going to happen for the Part B formulation, which includes patients with RA who can’t self-administer.”
According to fact sheets released by the White House and CMS, Medicare will negotiate prices for up to 60 drugs covered under Medicare parts B and D over the next 4 years, although it remains unclear which drugs will be chosen other than the initial 10 Part D therapies that have already been announced.
So far, CMS has stated that they plan to announce another 15 Part D drugs for Medicare price negotiation taking effect in 2027, then another 15 Part D and Part B drugs for 2028, and yet another 20 Part D and Part B drugs for 2029 and beyond.
For now, however, patients who receive only the infusion formulation of ustekinumab under Medicare Part B will have to wait at least another 4 years for prices to decrease. Meanwhile, further muddying the waters is the fact that many patients who are prescribed the self-administered formulation of ustekinumab consult with a provider about it, which may add a level of confusion about the definition of “self-administration,” according to Levin.
“All of this makes it unclear how this negotiation is going to work,” he said.
And the issues of clarity and implementation do not end there, according to Michael C. Schweitz, MD, head of the division of rheumatology at Good Samaritan Medical Center, in West Palm Beach, Florida, and past president and national advocacy chair of the Coalition of State Rheumatology Organizations.
“There is nothing in the statute about utilization management protocols,” he said. “What if the different formulations are put on different tiers? What if rebates for other drugs are higher, forcing formularies to push patients onto other medications?”
According to Gibofsky, these and other questions regarding the coming roll-out of price negotiation require answers sooner rather than later.
“To the extent that the prices will go down to the purchaser, this is a great development,” he said. “But what impact will that have on the price paid by the patient? How much will it actually go down and what result will it be for the patient?”
‘Maximum fair price’
However, perhaps the biggest question pertains to the notion of the “maximum fair price,” which the Inflation Reduction Act defines as the upper limit for the negotiated price of a specific drug.
According to HHS fact sheets, CMS will submit initial offers for maximum fair prices on all included drugs to the drug companies no later than Feb. 1, 2024. The companies will then have 30 days to accept the offer or provide a counteroffer.
The negotiation period is eventually slated to end on Aug. 1, 2024, and CMS plans to publish the negotiated maximum fair prices — set to take effect in 2026 — on Sept. 1, 2024. Explanations of the negotiated prices will be published by CMS no later than March 1, 2025, according to the fact sheet.
By law, there are certain factors CMS must take into account when drafting their initial offers, including research, development, production and distribution costs; prior federal financial support; and market, revenue and sales data. Offers must also factor in the extent to which the drug represents a “therapeutic advance” compared to existing alternatives, as and the costs of these alternatives, as well as whether the drug and its alternatives address an unmet need.
However, according to Gibofsky, there remain far too many unknowns regarding how CMS officials will arrive at specific dollar amounts.
“There is no guidance on what the maximum fair price should be or how it should be determined,” Gibofsky said. “It is a concept that is thrown around, but it is unclear what it means.”
Despite these concerns, Feldman remains optimistic.
“The combination of biosimilars and companies like Mark Cuban’s Cost Plus Drug Company may eventually bring prices down,” she said. “Maybe initially there will be a loss, but eventually there is going to be pressure to lower costs. This negotiation should help in that regard.”
For Feldman, as the negotiations ramp up and move toward whatever conclusion they will reach, the most important component of the discussion is to educate patients, providers, and employers about the various ways drug prices can decrease.
“We at CSRO have been educating self-insured employers about PBMs and other entities that contribute to high drug costs,” she said. “We have been helping to remove the wool from their eyes.”
Advocates like Levin have also been trying to educate lawmakers about the particulars of the drug price system.
“One of the ideas we have given regulators is to break out the negotiations by diagnosis to help make it more clear how each drug will be priced,” he said.
This is important, as rheumatology patients will be impacted more by Part B drug negotiations, while IBD patients will be impacted more by Part D negotiations, Levin added.
These efforts may prove beneficial as the next batch of drugs is negotiated. Although there is speculation that a Janus kinase or interleukin-17 inhibitor may make the cut, none of the experts quoted in this story was willing to take more than a semi-educated guess.
“I have no idea what their criteria are,” Snow said. “We do have a lot of high-priced medications that patients take for long periods of time, but it is tough to say which they might choose.”
For now, rheumatologists can hope that when the dust settles, their patients will have cheaper and easier access to etanercept and ustekinumab. However, all they can do is wait, according to Gibofsky.
“It is a challenge to figure out how price negotiations conducted in 2023 to 2024 will impact prices in 2026,” he said. “As Yogi Berra said, ‘It’s tough to make predictions, especially about the future.’”
References:
CMS releases revised guidance for historic Medicare Drug Price Negotiation Program. https://www.cms.gov/newsroom/press-releases/cms-releases-revised-guidance-historic-medicare-drug-price-negotiation-program. Published June 30, 2023. Accessed Dec. 12, 2023.
Fact Sheet: Key information on the process for the first round of negotiations for the Medicare Drug Price Negotiation Program. https://www.cms.gov/files/document/fact-sheet-negotiation-process-flow.pdf. Published September 2023. Accessed Dec. 12, 2023.
Fact Sheet: Medicare Drug Price Negotiation Program Revised Guidance. https://www.cms.gov/files/document/fact-sheetrevised-drug-price-negotiation-program-guidance-june-2023.pdf. Published June 2023. Accessed Dec. 12, 2023.
Medicare Drug Price Negotiation Program: Manufacturer agreements for selected drugs for initial price applicability year 2026. https://www.cms.gov/files/document/fact-sheet-manufacturer-agreements-selected-drugs-ipay-2026.pdf. Published October 2023. Accessed Dec. 12, 2023.
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