Radar on Drug Benefits

Between 2010 and 2021, 29.4% of pharmacies nationwide closed, leaving people in rural and underserved communities with less access to care, according to a recent study in Health Affairs. Independent pharmacies are most at risk, with a 39.8% chance of closing vs. a 21.9% closure risk for chain pharmacies. Locations in rural, urban, low-income, Black and Latino neighborhoods are also at great risk.  

While some stakeholders blame major PBMs for the pharmacies’ woes, those firms have recently been creating programs and increasing reimbursements to help shore up at-risk pharmacies. 

Although the provision aimed at broadening coverage of anti-obesity medications garnered the most attention, the Biden administration’s last Medicare Advantage and Part D rule was full of notable proposals for the health insurance industry to unpack. For those in the prescription drug benefits space, there are certain under-the-radar passages that are particularly worth reviewing. 

In one of those passages, CMS described several “reports, actions and findings” that indicate Part D plans are excluding generic or biosimilar drugs from their formularies or placing them on higher tiers as pricier branded drugs. In response, the agency said it plans to “include an additional step in the formulary review process to check that Part D sponsors provide broad access to generics, biosimilars, and other lower cost drugs.” 

Acknowledging the growing prevalence of obesity in the U.S. and its existence as a chronic disease, CMS in its proposed Medicare Advantage and Part D rule for the 2026 contract year included a landmark provision to expand Medicare and Medicaid coverage of anti-obesity medications (AOMs). The proposal opens the door to more Part D coverage of costly glucagon-like peptide-1 (GLP-1) medications — which are now covered for the treatment of Type 2 diabetes or major adverse cardiovascular events — and industry experts question how sponsors will determine eligibility and control what’s likely to be a significant increase in costs.

In the rule, which was issued on Nov. 26 and is slated for Federal Register publication on Dec. 10, CMS proposed a reinterpretation of Medicare and Medicaid law to provide coverage of AOMs for the treatment of obesity under Medicare Part D and Medicaid. CMS estimated that some 3.4 million Part D beneficiaries would become newly eligible to gain coverage for AOMs, at a 10-year program cost of about $25 billion (out of expected Part D spending of $2.1 trillion). With the revision to current Medicaid exclusions, coverage of AOMs would increase federal and state spending by a total of $40 billion over 10 years, CMS estimated.

Frustrated by rising pharmacy costs and seeking a simpler system, eight states in recent years have decided to “carve out” retail pharmacy benefits management from their contracts with Medicaid managed care organizations. So far, there appears to be limited evidence regarding whether such moves have been beneficial, and the number of Medicaid programs opting to do so has leveled off.

However, a “middle ground” approach first tested by Kentucky is gaining steam, as two states, Louisiana and Mississippi, followed in Kentucky’s footsteps after the state implemented such a program in July 2021. With that approach, Medicaid MCOs still get paid for providing pharmacy benefits but must contract with a single PBM and use a preferred drug list (PDL) selected by the state.