February 22, 2022

Pharmacy Price Concessions

How it Could Work

For this survey CIDSA experts were given excerpts from the Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs Proposed Rule by CMS. In addition to increasing price transparency and market competition in Medicare Part D, the rule is intended to lower beneficiaries’ out-of-pocket costs by passing some pharmacy price concessions along to the beneficiaries.  

In this proposed rule, CMS separately estimates changes in drug spending for various parties based on whether the proposed definition of ‘negotiated price’ is applied to all phases of the Part D benefit design (including the coverage gap) or only to the non-coverage gap phases. Please note that experts were asked to assess the policy as though the definition would be applied to all phases, including the coverage gap.

Currently, the negotiated price of a drug includes all network pharmacy price concessions except those contingent amounts that cannot reasonably be determined at the point-of-sale. Therefore, according to the proposed rule, “negotiated prices typically do not reflect any performance-based pharmacy price concessions that lower the price a sponsor ultimately pays for a drug, based on the rationale that these amounts are contingent upon performance measured over a period that extends beyond the point of sale and thus cannot reasonably be determined at the point of sale.”

The proposed rule aims to eliminate the exception of the contingent pharmacy price concessions and define negotiated price as: “the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor's intermediary (that is, the amount the pharmacy would receive net of the maximum negative adjustment that could result from any contingent pharmacy payment arrangement and before any additional contingent payment amounts, such as incentive fees).”

To assess the impact of this policy, the CIDSA experts were also given the financial impact estimates of applying this proposed definition to all phases of the benefit design, as seen below.

What the Experts Think

The majority of the CIDSA experts agreed that the proposed rule would increase drug spending, the remaining experts felt it would not affect spending. The experts unanimously agreed that this policy would not affect list prices; while the majority also agreed that this rule would not affect net prices, one expert opined that it would moderately decrease net prices. While most patient groups’ access would be unaffected by this policy, Medicare patients and large patient groups would see a moderate increase in their drug access.

All of the experts opined that this policy would minimally advance drug spending policy. The experts also unanimously agreed that the size of the affected patient population would be a strength to this policy; the majority also believed that the ease of implementation would be a strength. Conversely, the experts unanimously agreed that the magnitude of drug spending impact this policy would have would be a policy weakness. Finally, the experts were split on the precedent setting value of this policy with three experts arguing it was a strength, three saying it remains unknown, and one arguing it is a weakness.

Only 8 experts were able to participate Round 1 of this survey; only 7 experts were able to participate in Round 2 of this survey.

How likely would this policy be to reduce drug spending?
Would Increase Drug Spending
Would Not Affect Drug Spending
Would Minimally Reduce Drug Spending
Would Moderately Reduce Drug Spending
Would Significantly Reduce Drug Spending
Would Substantially Reduce Drug Spending
How likely would this policy be to reduce drug prices?
Would Significantly Increase Drug Prices
Would Moderately Increase Drug Prices
Would Not Affect Drug Prices
Would Moderately Decrease Drug Prices
Would Significantly Decrease Drug Prices
List Prices
Net Prices
How likely would this policy be to increase patient drug access?
Would Significantly Reduce Drug Access
Would Moderately Reduce Drug Access
Would Not Affect Drug Access
Would Moderately Increase Drug Access
Would Significantly Increase Drug Access
Rare Disease
Large Patient Groups
How significant is this policy in the evolution of US drug spending policy?
Does Not Advance Drug Spending Policy
Minimally Advances Drug Spending Policy
Moderately Advances Drug Spending Policy
Significantly Advances Drug Spending Policy
Ground-Breaking Shift in Drug Spending Policy
What are strengths and weakness of this policy?
Size of Affected Population
Evidence Base in Support of Policy
Precedent-Setting Value
Magnitude of Drug Spending Impact
How important are the following in your analysis of the policy's impact?
Not Important
A Little Important
Somewhat Important
Very Important
Uncertainty of which drugs would be subject to these fees
Uncertainty of how rebates would be passed through
How POS transaction prices net of all concessions are actually recorded and verified by retail and mail order pharmacies
Unclear if manufacturer rebates for brand name drugs would be included in the calculations
Unclear how beneficiaries are directly impacted by this issue
Pharmacies or plans may manipulate the lowest price received for a drug to reduce penalties
Whether these penalties will vary across pharmacies and drugs

Considerations for Policymakers

The expert panel highlighted several policy concerns for policymakers to consider. Most notably, the experts highlighted that pharmacies and health plans would be able to manipulate the lowest price they received for a given drug in order to reduce any penalties. Other significant information gaps that should be addressed include how POS transaction prices net of all concessions are actually recorded and verified by retail and mail order pharmacies, as well as the uncertainty of how beneficiaries will be directly impacted by this issue. The experts also called attention to multiple slighter uncertainties they had regarding the proposed rule, including whether manufacturer rebates for brand name drugs would be included in the calculations, how rebates would be passed through, which drugs would be subject to these fees, and whether these penalties will vary across pharmacies and drugs.