Radar on Drug Benefits

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.

Independent pharmacies scored an early win in a class action lawsuit against CVS Health Corp., Caremark and Aetna that seeks to recoup millions of dollars in direct and indirect remuneration (DIR) fees. The National Community Pharmacists Association (NCPA) hailed the “landmark” decision to allow the court to decide whether arbitration is necessary, noting that arbitration clauses keep similar cases and their facts secret. “That allows Caremark and the other PBMs to continue to treat pharmacies unfairly and illegally extract junk fees,” Matthew Seiler, NCPA’s general counsel, said in a statement.

On Nov. 15, Judge John Tuchi in the U.S. District Court for the District of Arizona ruled that the court should decide whether the case should be sent to arbitration, not an arbitrator. He deemed several provisions of the CVS arbitration clause unconscionable, including one that requires plaintiffs to deposit $50,000 in an escrow account before arbitration. A CVS spokesperson tells AIS Health that the company is reviewing the order but has no additional comment on ongoing litigation.

Small-molecule drugs and biologics may produce similar health benefits, but because small molecules tend to be priced lower than biologics, they often represent better value, according to a recent Health Affairs study. And the study authors argued those findings suggest it could be worth revising how the Medicare Drug Price Negotiation Program is set up.

The Inflation Reduction Act of 2022 requires that Medicare negotiate a Maximum Fair Price for selected small-molecule drugs nine years after they were approved by the FDA. Whereas for selected biologics, the negotiated price takes effect after 13 years.