Legislation & Regulation

MA Part B Makes Controversial Jump Into Step Therapy

Verma, CMS say bringing step therapy to Part B will save plans and beneficiaries money. Critics see perverse incentives and circumvention of normal rulemaking.

Richard Mark Kirkner
Contributing Editor

Ophthalmologist John Thompson, MD, worries what would happen if a patient with age-related macular degeneration who’s had a stroke comes into his Baltimore office and needs an eye injection to preserve her sight. He believes there’s enough evidence to suggest a $2,000 drug is best for patients who’ve had a stroke, but he’s concerned that if that patient has Medicare Advantage (MA), the plan would require him to start with an off-label drug that costs $50 and which a multitude of studies and formulary committees have found to be just as safe and effective.

Welcome to the hypothetical scenarios physicians are fretting over since CMS Administrator Seema Verma issued a memo in August that gave MA plans the green light to implement prior authorization and step therapy—also known as “fail first”—for Part B drugs starting January 1. The idea is to let the plans use their Part D P&T committees to establish protocols that would designate first-line—and presumably lower-cost—Part B drugs.

Step therapy is common in commercial insurance but new to MA. Insurers defend it as an evidence-based way to put some guardrails on ill-advised, costly prescribing. Appeal processes, they say, ensure that patients are not denied the medication they need.

Practitioners, medical societies, and drugmakers complain, though, that Verma’s guidance is vague, gives plans too much latitude in dictating step edits, and runs roughshod over physician discretion and decision making. In September, more than 90 medical societies sent CMS a letter objecting to the step edits.

MA plans, meanwhile, are ready to embrace the idea. Michael Anderson, chief pharmacy officer for UnitedHealthcare’s Medicare business, said in a news release, “Expanding the use of step therapy is a positive step toward lowering prescription prices for Medicare beneficiaries.” Some health policy analysts say it could encourage drugmakers to be more aggressive in negotiating discounts with pharmacy benefit managers in order to get their drugs on the first step.

This decision could yet be the subject of a court battle. Verma’s memo rescinded a 2012 Obama administration memo that stated step therapy, among other restrictions on Part B drugs for MA plans, is not permitted unless “original Medicare” also allows it.

MA plans designing step therapy programs can take three “must-dos” from Verma’s August guidance memo. They must a) disclose to beneficiaries before they sign up that Part B drugs may be subject to step edits, although they do not necessarily have to specify which drugs; b) provide patient care coordination; and c) share savings from step edits with patients in the form of noncash rewards, presumably something like gift cards or credits for other services. The reward must equal at least half the amount saved on average per patient.

John Thompson, MD

The usual rulemaking process was circumvented by CMS, giving MA plans the OK to implement prior authorization and step therapy, says John Thompson, MD, of the American Society of Retina Specialists.

Her critics say Verma’s decision to allow the step edits circumvented the usual rulemaking process. “This memo from August just came out of the blue and it didn’t get adequate discussion from medical organizations about what’s wrong with that approach,” says Thompson, who’s also former president of the American Society of Retina Specialists and now chair of its council on health policy.

In November 2018, CMS eventually did publish proposed step edit rules, but they aren’t scheduled to go into effect till 2020.

The shared savings in Verma’s August memo may seem like a good deal for beneficiaries but Thompson sees it as possibly luring patients into accepting less-than-effective treatment.

Theoretically, for example, says Thompson, the shared savings could mean a reward of around $900 per dose for a patient with age-related macular degeneration receiving an eye injection of off-label Avastin, the cancer drug that costs about $50 when repackaged for the eye, whereas the two FDA-approved agents cost about $2,000 per dose. (According to OpenPaymentsData.CMS.gov, Thompson received around $8,500 in 2017 from Genentech, which makes both Avastin and Lucentis, one of the two $2,000 drugs.) A patient who should get the more expensive drug to preserve her or his vision may elect to stay with the cheaper drug for the reward, says Thompson: “It creates a very perverse incentive that we think is ripe for abuse.” A survey of retina ophthalmologists last year found 60% of them start patients on off-label Avastin anyway. “Less than 50% of patients get the more expensive drugs,” he says. The proposed rules for 2020 would give plans the option to offer rewards.

Can step edits cut costs?

Step edits are one of health plans’ favorite ways of restricting coverage, James D. Chambers of Tufts Medical Center and co-authors, reported in Health Affairs in July 2018. In an analysis of specialty drug coverage decisions by the largest U.S. commercial health plans, they found that step edits were the most common restriction, employed in 73.2% of decisions to restrict coverage. The article noted that plans are less likely to restrict drugs for cancer, orphan diseases, and pediatric diseases, and that they tend to implement step edits only when multiple alternatives are available.

Last year Dan Best, a senior adviser to HHS on drug pricing who died in October, told reporters that the step edits could save Medicare Part B up to $2.4 billion, or 20%, of the $12 billion it spends on MA drugs. In a comment letter to Verma in December, AHIP President and CEO Matthew Eyles lists step therapy as one of the “effective management tools” for negotiating discounts from drugmakers.

Stacie Dusetzina, a health policy professor at Vanderbilt University School of Medicine, says because Verma’s guidance allows step edits in Part B to use Part D drugs, it may encourage drugmakers to be more aggressive in their discounting. “If you’re a drugmaker, it’s very important for you to be the first drug in the step therapy protocol,” she says.

Essentially, says Dusetzina, some drugs covered in both Part B and Part D could compete with each other (although Part B is for office-administered drugs and Part D pharmacy-filled prescriptions). Says Dusetzina: “One question that I don’t think has been fully answered is, how often do you have products that are really good substitutes for one another where some are offered on Part B and some are offered on Part D?”

One concern Dusetzina has is the higher out-of-pocket costs that come with Part D drugs. “We’re trying to introduce new ways to reduce overall Medicare spending, but we also have to remember that we should reduce patient spending at the same time,” she says. Two “forward-thinking” ideas she’d like to see implemented: first, ensuring that patients taking a Part D drug in step therapy do not pay more than they would if the recommended drug was covered on Part B, and, second, adding further out-of-pocket cost protections for patients who “fail” a step and need to move to a more expensive treatment.

What is failure?

What worries some critics is that for step edits, or “fail first,” to work properly, a clear definition of “failure” is in order. “Failure can be defined in a lot of different ways,” Thompson says. “I strongly suspect the Medicare Advantage plans are going to struggle coming up with an appropriate definition of failure.” In Thompson’s line of work, failure can mean loss of vision.

Ray Page, MD

“Some of these step edits that we worry about may be forcing us to give drug B before drug A,” says Ray Page, MD, an oncologist in Fort Worth.

Ray Page, MD, an oncologist in Fort Worth, says that in his specialty, failure could mean a recurrence of cancer, or severe side effects like nausea and vomiting—common side effects of chemotherapy drugs. “The formulary probably works 80% of the time, but with perhaps 20% of patients, [we] have a legitimate reason at the bedside that we want to give a certain drug at a certain time,” says Page. For example, the order of sequencing cancer drugs can differ among patients.

“Some of these step edits that we worry about may be forcing us to give drug B before drug A,” says Page, who’s also chair of the clinical practice committee of the American Society of Clinical Oncologists. ASCO opposes the step edits. (Page received almost $600,000 in payments in 2017 from drugmakers, including research funding.)

Page and other clinicians hope MA plans can figure that out before they get too deep into step edits.

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