The Advance Notice of Methodological Changes for Calendar Year 2018 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2018 Call Letter (Call Letter) was issued by the Centers for Medicare & Medicaid Services (CMS) on February 1. Comments are due by March 3. The final call letter is to be published April 3. The Call Letter proposes several updates and changes to the payment methodologies and plan design features for stand-alone prescription drug plans (PDPs) and MA-PDs, while remaining consistent with prior guidance in certain areas. This article focuses on the impact of the Call Letter on Part D prescription drug plans.

Updates to the RxHCC. CMS proposes updates to the RxHCC risk adjustment model used to adjust direct subsidy payments for Part D benefits, including:

  • 2018 Benefit Structure. In recalibrating the RxHCC risk adjustment model to reflect the 2018 benefit structure, CMS adjusted Prescription Drug Event (PDE) data similar to prior years’ model calibrations. For 2018, plan liability for non-LIS beneficiaries in the coverage gap will be 56% for generic drugs and 15% for brand drugs. All PDE data was mapped to the defined standard benefit across all phases of the Part D benefit. The changes will only differentially affect the risk scores of LIS and non-LIS beneficiaries because plan liability for non-LIS populations, relative to LIS populations, will increase.
  • Data Years Used to Calibrate the RxHCC Model. CMS updated the underlying data using diagnosis data from 2014 fee-for-service claims and MA-PD RAPS files, along with expenditure data from 2015 PDE records. According to CMS, RxHCC model recalibration can result in changes in risk scores for individual beneficiaries and for plan average risk scores, depending on each individual beneficiary’s combination of diagnoses.

Risk Sharing Amounts Unchanged. CMS evaluated risk sharing amounts for 2008–2015 to assess whether they have decreased or stabilized. CMS found risk sharing amounts continue to vary from year to year and among Part D sponsors in any given year. CMS, therefore, left the risk percentages and payment adjustments for Part D risk sharing unchanged from 2017.

Tiering Exceptions Clarifications. Part D plans must allow beneficiaries to request tiering formulary exceptions to obtain drugs at a more favorable cost-sharing amount when a drug in a higher cost-sharing tier is medically necessary. Due to concerns that plans are being too restrictive in approving such requests, CMS clarifies the following:

  • Tiering exception eligibility should not be based on the “label” of the tier on which the alternative drug is placed, but rather whether the tier has lower cost-sharing than the requested drug, thereby making it preferred. Further, consideration should not be limited to a single lower tier if multiple lower tiers containing alternative drugs exist. For example, a plan may not deny a tiering exception request based solely on the fact that a tier may be labeled “generic,” when in fact it also includes brand drugs, or because a certain tier may be labeled “preferred,” if there are other, alternative drugs on lower tiers with lower cost-sharing than the requested drug.
  • Where the requested drug has alternatives in multiple lower tiers and the plan approved the tiering exception request, the plan must apply the cost-sharing for the lowest applicable cost-sharing tier containing alternatives for the requested drug because the lowest cost-sharing tier is the “applicable lower cost sharing-tier.”

Accessing Preferred Cost-Sharing Pharmacies (PCSPs). For 2018, CMS proposes maintaining Part D policies established in 2016 concerning access to PCSPs, including posting information about current year’s PCSP access levels on CMS’ website, requiring outlier plans to disclose that their plan’s PCSP network offered lower access than other plans, and working with plans that are “extreme outliers” to address concerns about beneficiary access and marketing representations relating to preferred cost-sharing. Additionally, CMS will continue to apply the same access standards it did for 2016 and expect Part D plans to analyze their own 2017 and 2018 networks to determine whether they satisfy these standards and fall below the outlier thresholds.

Specialty Tier. While proposing to maintain the specialty tier cost threshold at $670 per month for 2018, CMS expressed concern that almost 20% of formulary drugs were priced above the threshold. CMS has committed to further investigating these trends to shape future analyses involving the specialty tier.

Drug Utilization Review. To address the opioid epidemic, CMS previously implemented a medication safety approach, reflecting its expectation that Part D sponsors reduce beneficiary overuse of opioids, as well as the Overutilization Monitoring System to help oversee sponsors’ compliance with CMS overutilization guidance. For 2018, CMS proposes several updates aimed at addressing drug utilization concerns within Part D, including revisions to the retrospective drug utilization review criteria used to identify potential opioid overutilizers to align more closely with Center for Disease Control and Prevention guidelines on opioid prescribing, to reduce false positives and maintain a manageable policy for sponsors, as well as to establish an expectation that sponsors, at a minimum, “implement hard formulary-level safety edits . . . to prospectively prevent opioid overuse at point of sale at the pharmacy.”

The agency has made available a fact sheet on the Call Letter.

This article was originally published as an email alert by The American Health Lawyers Association (AHLA) Payers, Plans, and Managed Care Practice Group. The content was written by Peter L. Thurman Jr. and reviewed by Melissa A. Wong and Harsh P. Parikh.