Wait…Can He DO That?!

I thought I would post this morning about the authorities that President Trump has and whether he has the power to implement a massive change in Medicare prescription drug payment policy.

Short answer: yes.

Longer answer: keep reading.

The Affordable Care Act added section 1115A to the Social Security Act, which established the Center for Medicare and Medicaid Innovation (CMMI) to “test innovative payment techniques and service delivery models” within Medicare and Medicaid. The statute allows the Centers for Medicare and Medicaid Services (CMS) to expand those models if they meet certain criteria: namely that they either reduce costs while not reducing quality of care or outcomes or increase quality of care and/or outcomes without increasing overall costs.

CMMI has used this authority to test Accountable Care Organizations (ACOs), alternative payment models for joint replacements (the Comprehensive Care for Joint Replacement program), enhanced preventative care for Medicare beneficiaries at-risk for developing diabetes mellitus (the Diabetes Prevention Program), among others. CMMI is also involved in administering the Quality Payment Program for clinicians and providers.

Unlike Medicare Part D, Medicare’s outpatient prescription drug benefit, which contracts the responsibility for negotiating prices with manufacturers to plan sponsors (who then compete against one another for beneficiaries), Medicare Part B establishes payment rates for covered drugs (which are primarily those administered by a clinician in an office setting) by statute. Most drugs are paid at 106% of average sales price (ASP, or “ASP+6%”).

The catch? Average sales price is calculated and reported by manufacturers to CMS. Unlike other countries’ public health care systems, the U.S. government is not involved in establishing prices for prescription drugs. And unlike drugs covered under Part D, manufacturers of drugs covered under Part B don’t have to negotiate with private plan sponsors to earn preferential formulary placement. In fact, the Social Security Act essentially requires Medicare to cover all Part B drugs once they are approved by the U.S. Food and Drug Administration (FDA). [Side note: there are exceptions to this, maybe I’ll blog about that tomorrow...]

With no upper ceiling on prices, and few utilization controls, concern over prices and spending for prescription drugs in Part B has grown. According to the Medicare Payment Advisory Commission (MedPAC), Medicare spending on prescription drugs covered by Part B has increased by at least 10% every year since 2009, reaching $32 billion in 2017. MedPAC cites rising drug prices and the introduction of newer, more expensive therapies as the primary drivers of this trend.

Which all makes the issue of Medicare Part B prescription drugs an attractive target for drug pricing reformers in both Democratic and Republican administrations: there is a single pricing methodology (ASP+6%), a single payer (Medicare) and authority to test the idea without Congressional approval (CMMI).

In 2016, the Obama Administration proposed a model that would test not only an alternative payment methodology, but also utilization management. After pushback from industry, providers, patients, Republicans, and Democrats in Congress, the administration scrapped the plans in late 2016. The Trump Administration followed suit in late 2018, releasing an Advance Notice of Proposed Rulemaking (a regulatory equivalent of a request for comment) outlining a proposal that would tie Medicare payment rates to the payment rates in selected ex-U.S. countries. At the same time, the Administration released a study showing that on average, Medicare paid almost twice as much as other countries for the same drugs. But the administration has not moved on the issue since then.

But enter Sunday, September 13, 2020. President Trump signed an Executive Order directing CMS to complete the rulemaking process on a model that would test a payment methodology tied to international drug prices. As I said yesterday, the timeline is not in the President’s favor: though he may get a proposal out the door before the November elections, there is no way to get anything finalized or implemented by then, meaning beneficiaries (a.k.a. “voters”) won’t see any relief before heading to the polls.

While it is possible the President could finalize something before the end of his first term, there is simply not enough time to upend the complex prescription drug payment system prior to January 2021. If the voters give President Trump a second term, he could continue his work, but I expect he would face opposition from Congress, who could pass legislation restricting the Administration’s ability to use their CMMI authority in such a manner tomorrow if they wanted.

So yes, the President does have the authority to take on something like this, but he faces many challenges, primarily time. Beneficiaries will have lots of time to absorb messaging about all the terrible things international reference pricing will do to their medical care before they can see if it would benefit their wallets. And while they may not trust drug companies, they do trust their doctors. And because of the unique financial relationship between physicians and physician-administered drugs, doctors have a vested interest in the issue as well. An issue like this will require collaboration and buy-in from all of the affected parties in order to be successful, and a tactic such as using CMMI authority to usher in sweeping change is not really the way to get there.