Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC staff comments on CMS proposed contract changes to Medicare prescription drug benefit programs, (Mar 11, 2014)

By Linda O’Brien, J.D., LL.M.

The staff of the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics, in response to a request from the Centers for Medicare and Medicaid Services (CMS), provided comments on March 7 on CMS’ proposed changes in contracting for Medicare Part D. CMS announced on March 10 that it will delay finalizing certain portions of the proposed rule, including the “any willing pharmacy” provisions, pending further stakeholder input.

In its January 2014 request for comments on “Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs,” the CMS stated that, in establishing the Medicare prescription drug program, Congress sought “to promote competition in the private market for Part D drugs.”

CMS proposes to require that prescription drug plans (PDPs) offering preferred cost sharing permit “any

willing” pharmacy the opportunity to offer preferred cost sharing if the pharmacy can offer the requisite level of negotiated prices.” The CMS also proposes publication of preferred and non-preferred prices, terms, and conditions. The rules require that variation of these terms or tiers be restricted such that, “[f]or prescriptions not subject to Long Term Care, specialty pharmacy, or home infusion pricing, [there will be] three authorized levels of cost sharing: standard, preferred, and extended days’ supplies for retail and mail order pharmacies.”

The staff comment suggested that CMS reconsider a proposal to implement an “any willing pharmacy” provision, and further examine whether such provisions are likely to benefit Part D beneficiaries and the Part D program. The health plans’ ability to construct networks that include some, but not all, providers can be an important tool to enhance competition and lower costs in markets for health care goods and services.

According to the FTC staff comment, the proposed provisions threaten the effectiveness of selective contracting with pharmacies as a tool for lowering costs. The requirement that prescription drug plans contract with any willing pharmacy would reduce the ability of plans to obtain price discounts based on the prospect of increased patient volume and, thus impair the ability of prescription drug plans to negotiate the best prices with pharmacies. The FTC staff observed that evidence suggests that prescription drug prices are likely to rise if PDPs are less able to assemble selective pharmacy networks. The proposed provisions may also hinder the ability of plans to steer beneficiaries to lower-cost, preferred pharmacies and preferred mail order vendors through financial incentives or other terms. Finally, Medicare beneficiaries may also have fewer choices if the any willing pharmacy provisions change the incentives of PDPs and result in fewer plans competing in the Part D marketplace. Specifically, beneficiaries who are willing to accept coverage under a plan with a narrow network of preferred pharmacies in exchange for lower costs may be deprived of that option, the FTC staff comment concluded.

The Commission vote to issue the staff comment was 3-1, with Commissioner Brill dissenting.

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