Last week, there were two separate key developments related to the Medicare Part D program. On February 2, President Obama released the Fiscal Year 2016 Budget Request and the Department of Health and Human Services issued its Fiscal Year 2016 Budget in Brief (collectively the Budget) containing significant proposals affecting pharmaceutical manufacturers that offer Medicare Part D rebates to Medicare Advantage (MA) plans and Part D sponsors. On February 6, the Centers for Medicare and Medicaid Services (CMS or Agency) released an anticipated final rule revising regulations for MA plans and Part D sponsors (the Final Rule).
Fiscal Year 2016 Budget Provisions
The Budget contains a number of important proposals related to the Medicare Part D program that would increase costs to pharmaceutical manufacturers participating in the Medicare Part D program, including the following:
Proposal to require pharmaceutical manufacturers to provide rebates on behalf of Part D low-income subsidy (LIS) enrollees in an amount at least equal to the difference between rebate levels they already provide Part D plans and the Medicaid rebate levels, beginning in 2017.
Proposal to authorize the Secretary of Health and Human Services (HHS) to negotiate drug prices for high-cost drugs and biologics in Medicare Part D. HHS would require pharmaceutical manufacturers to provide “all data and information necessary to come to an agreement on price.”
Proposal to close the coverage gap for brand name drugs in the Part D benefit by 2017 (three years earlier than under the current law) by increasing the discount amount that the pharmaceutical industry is required to pay.
Since its February 2, 2015 release, the President’s Budget (as first referred above) continues to be reviewed by congressional committees including the House and Senate Budget Committees, the Senate Finance Committee and the House Ways and Means Committee. It is unlikely that the President’s FY 2016 budget proposal will be adopted by the Republican-controlled Congress. Instead, we expect Congress to develop its own budget resolution by April 15 (as technically required by law) to provide guidance to the House and Senate Appropriation Committees. However, even if the Congress does not pass a budget resolution, as the next step, the Appropriation Committees will negotiate and approve 2016 spending bills for agencies.
CMS Final Rule
The Final Rule sets forth a number of provisions directed toward MA and Part D plan sponsors that remained unaddressed from the Agency’s broad-reaching, controversial January 2014 proposed rule. Most significantly for pharmaceutical manufacturers, CMS maintains its decision not to revisit certain proposals that it declined to address in a May 2014 final rule, including a proposal to eliminate three of the six protected classes and a proposal to permit the Agency to intervene in negotiations between Part D sponsors and pharmacies. The goals of the non-interference proposal are now being advanced through the Budget, as mentioned above, which contemplates negotiations of prices with pharmaceutical manufacturers for certain high-cost Part D drugs and biologics. The various provisions of the Final Rule – primarily relevant to MA and Part D plan sponsors – take effect 30 days after publication in the Federal Register.
In the upcoming months, pharmaceutical manufacturers should continue to monitor the Budget proposals and CMS efforts to implement the Executive Branch’s plans for the Medicare Part D program.