2:41 PM
Feb 12, 2018
 |  BC Extra  |  Politics & Policy

Trump budget proposal seeks to cut Medicare, Medicaid drug costs

The Trump administration’s FY19 budget proposal includes numerous provisions that are intended to cut out-of-pocket drug costs for patients, as well as government spending on drugs. Many of the proposals could only be enacted through legislation.

As expected, the proposal includes provisions that would force Medicare Part D plans to return a portion of drug company rebates to beneficiaries (see BioCentury, Feb. 9).

Under the budget proposal, Part D sponsors would “apply at least one-third of total rebates and price concessions at the point of sale.” The proposal does not provide details on how the amounts returned to Medicare customers would be calculated. It states that the rebate return policy, which would start in 2019, would be enacted through legislation. The policy would cost the federal government $1.8 billion in 2019, and $42 billion from 2019-2029.

The Trump administration plans to ask Congress to shift a substantial portion of the costs of reinsurance for Part D patients’ catastrophic drug coverage from the government to Medicare Part D plans and to cap patient out-of-pocket costs. Catastrophic coverage kicks in when Part D patients incur sufficient out-of-pocket expenses to exceed the coverage gap or “donut hole.” For FY18, catastrophic coverage kicks in when patients have $5,000 in out-of-pocket expenses. The budget proposal seeks to increase plan liability for catastrophic drug coverage to 80% over a four-year period, from the 15% current rate, and decrease Medicare’ liability to 20%. This would eliminate catastrophic drug payments for Part D beneficiaries.

Patient advocates are certain to fight the proposal’s suggestion to allow Medicare Part D plans to cover fewer drugs by lowering the required number of covered drugs to one per therapeutic category from the current requirement of at least two per category. The proposal also states that the Trump administration will seek to expand the “plans’ ability to use utilization management tools for specialty drugs and drugs in protected classes to empower plans to better manage the Part D drug benefit,” but does not provide details about the tools.

The proposal also includes several policies that are intended to cut spending on Medicare Part B drugs, which are administered in a physician’s office or a hospital outpatient setting, such as many infused and injected drugs. One recommendation would restrict price increases for Part B drugs to the inflation rate.

Another suggestion is to allow CMS to shift drugs to Part D from Part B. In January, HHS Secretary Alex Azar also suggested that government apply lessons from Part D to change Part B. While Part D prices are negotiated by private plans, Part B prices are set by the average sales price (ASP) plus a 6% fee (see BioCentury Extra, Jan. 9).

The administration also proposed cutting reimbursement for Part B drugs that are reimbursed based on wholesale acquisition costs (WAC) rather than ASP, such as newly approved drugs, to a rate of WAC plus 3% from WAC plus 6% currently.

The Trump administration is also seeking the authority to allow up to five states the flexibility to negotiate prices with drug manufacturers and to opt out of the Medicaid Drug Rebate Program.

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