Medicare Compliance & Reimbursement

Some sponsors say government going back on its word.

Could the Part D drug benefit wind up being a lot less profitable than many prospective sponsors hope?

New guidance released by the Centers for Medicare and Medicaid Services echoes what the agency has been telling many sponsors in one-on-one meetings about the sponsors' formulary designs, and the news is troubling to some health plans and pharmacy benefit managers.

In a new Frequently Asked Questions document available on its Web site, CMS reiterates that sponsors of prescription drug plans will need to include in their formularies "all or substantially all" of the drugs in five categories: antidepressants, antipsychotics, anticonvulsants, immunosuppressants, anticancer and HIV/AIDS drugs.

Cost Control Concerns Potential Sponsors

Some PDP sponsors who had their initial formularies shot down by CMS and have had to go back and expand their proposed offerings are wondering if the larger formularies will make it more difficult for them to control costs and make a profit from Part D.

"The government is not presenting itself as a viable business partner" due to the way it's changing the terms of Part D participation, Carolyn Stables of the Academy of Managed Care Pharmacy tells MLR.

CMS insists in the FAQ that this shouldn't be news to sponsors and that the agency has been pressing this point all along. "CMS has consistently explained" that PDPs would need to offer "all or substantially all" drugs in these categories, the agency says.

The reason: "Interruption of therapy in these categories could cause significant negative outcomes to beneficiaries in a short timeframe," CMS reports.

AMCP disagrees with CMS' reasoning, however. In a June 14 letter it sent to CMS asking the agency to reconsider its "all or substantially all" guidance, AMCP says that CMS in its January 2005 final rule had set the bar far lower. AMCP also says the new formulary guidance is "inconsistent with best practices in the private sector," despite CMS' claims that it is merely trying to create a Medicare benefit consistent with commercial formularies.

In its letter to CMS, AMCP says, "If all plan sponsors are required to include all the medications within any therapeutic category, the competitive goal of the legislation is greatly limited." Drug manufacturers will ask top dollar for their drugs, and PDP sponsors will be unable to control costs, AMCP implies.

CMS argues that many future Medicare benes who receive coverage through commercial or government plans currently have access to these medications, and that Medicare should ensure that they do not lose coverage when they switch to the entitlement program.