CMS Action Aims to Lower Prescription Drug Prices, Increase Cost Transparency


The final rule requires Part D plans to adopt tools that provide clinicians with information that they can discuss with patients on out-of-pocket costs for prescription drugs at the time a prescription is written.

The Centers for Medicare & Medicaid Services (CMS) issued a final rule Thursday for improving and modernizing the Medicare Advantage and Part D programs.1

However, the changes are not enough for some pharmacy direct and indirect remuneration fee (DIR) reform advocates.2

The CMS’ final rule aims to ensure that patients have greater transparency into the cost of prescription drugs in Part D with the ability to compare options and demand value from pharmaceutical companies.3

The final rule also will allow Medicare Advantage plans to negotiate better prices for physician-administered medicines in Part C, according to the CMS.

The final rule requires Part D plans to adopt tools that provide clinicians with information that they can discuss with patients on out-of-pocket costs for prescription drugs at the time a prescription is written, according to CMS Administrator Seema Verma.3

“By empowering patients with information on the cost of their prescription drugs, [the] rule will ensure that pharmaceutical companies have to compete on the basis of price. This effort builds on new requirements for hospitals to disclose chargemaster prices and other agency initiatives to promote price transparency,” Verma said in a statement.3

After an implementation period, Part D plans will be required to provide access to a tool that is integrated into clinicians’ electronic prescribing or electronic health records (EHR) systems.3

Some plans are already offering these tools, but the new policy will require all plans to provide clinicians with access to price information for different prescription drugs, according to the CMS.3

Getting more information to patients and their clinicians about out-of-pocket costs for prescription drugs is designed to help eliminate pricing surprises at the pharmacy counter.

To further promote transparency, the CMS’ final rule also requires the Explanation of Benefits document that Part D enrollees receive each month to include information about drug price increases and lower-cost therapeutic alternatives.

As a result of these changes, patients and their clinicians will be able to better understand the cost of prescription drugs and seek out high-value options, helping to increase patient adherence and improving health outcomes, agency officials said in a statement.3

The CMS is also codifying a policy that allows beneficiaries to select a Medicare Advantage plan that negotiates prices for physician-administered medicines when beneficiaries are first starting on the medicines. By strengthening a plan’s ability to negotiate with prescription drug companies, this policy will ensure that plans can better deliver value for a patient’s medical needs.3

Many physician-administered medicines are biologics, which are some of the most expensive therapies in use. Lower-cost biosimilars are coming to market to compete with biologics, and this policy is part of the Trump administration’s broader strategy to foster innovation in biosimilars to drive competition in the market for physician-administered drugs.3

In addition, the rule implemented in Part D legislation prohibits “gag clauses,” which keep pharmacists from telling patients about lower-cost ways to obtain prescription drugs. These efforts to promote transparency on the price of prescription drugs complement a series of other changes toward this important goal, including a final rule issued by the CMS last week to require pharmaceutical companies to disclose the list price of prescription drugs in direct-to-consumer television advertisements.

In the proposed rule, the CMS said that the agency was considering a policy to ensure that beneficiaries pay the lowest cost for the prescription drugs they pick up at a pharmacy, after taking into account back-end payments from pharmacies to plans.3

Although the CMS is not implementing this policy for 2020, the agency said that it appreciates the more than 4000 comments that were received on this issue.3

The CMS said that it is continuing to carefully review these comments as it continues to consider policies that would address challenges that independent pharmacies face, improve the quality of pharmacy care, and lower prescription drug costs.3

Also in the proposed rule, the CMS proposed facilitating negotiations for discounts for drugs in Part D’s “protected” therapeutic classes.3

In its press release, the agency said that it appreciates the feedback received on this issue and has chosen not to finalize the proposed changes to its protected classes policy at this time but rather is codifying existing policy.

However, the administration remains concerned that prescription drug companies are offering seniors in Medicare substantially smaller discounts for protected-class drugs than are offered in the commercial market. Seniors in Medicare are paying more than commercially insured beneficiaries, and the CMS will continue to execute on the administration’s blueprint to lower prescription drug prices and address this problem.3

In a joint statement reacting to the final rule, the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) said that the changes failed to reform pharmacy DIR.2

“We are disappointed and frustrated that this final rule fails to finalize pharmacy DIR reform as proposed, to the detriment of seniors and community pharmacies," according to the joint statement.2

"Our organizations have been joined by many pharmacists, pharmacy stakeholder groups, patient advocacy organizations, patients, and members of Congress in advocating that all pharmacy price concessions be included at the point of sale, or eliminated altogether, to provide senior patients with lower costs and pharmacies with more certainty,” according to the joint statement.

Pharmacy DIR fees are based on a regulatory loophole that plans have exploited to increase beneficiary drug costs, according to the NACDS and NCPA.2

These fees are being misused by payers to claw back reimbursement to pharmacies for the prescription drugs that they provide to Medicare beneficiaries, they said.2

An example the 2 organizations cited was payers imposing penalties for pharmacies’ alleged failure to achieve certain benchmarks, many of which are inconsistent, outside the control of pharmacies, unachievable, undefined, or vague.2

Misinterpretations of specific terms that are used in the Medicare program related to pharmacy reimbursement and drug pricing have led to these claw-backs, and ultimately to higher out-of-pocket drug costs for patients and increased costs for the government, the organizations said.2

“In its proposed rule, the administration cited the recent 45,000% increase in pharmacy price concessions, an increase that is unsustainable. Pharmacies are in a tenuous situation, and our organizations are exploring all options to accomplish desperately needed reforms to pharmacy DIR," according to the statement.2

"It is necessary for community pharmacies and for the benefit of seniors that this reform take effect as soon as possible,” according to the statement.2

In announcing the changes, US Department of Health and Human Services Secretary Alex Azar said that the “improvements” being made to Medicare Advantage and Medicare Part D deliver on the promises in the administration's blueprint to provide more negotiating tools and more transparency for patients.3

“They are significant steps toward a Medicare program, a drug pricing marketplace, and a health care system where the patient is at the center and in control,” Azar said in a statement.3


  • Centers for Medicaid and Medicare Services. Fact Sheet: Medicare Advantage and Part D Drug Pricing Final Rule (CMS-4180-F). Published May 16, 2019. Accessed May 17, 2019.
  • NCPA, NACDS Statement on Drug Pricing Rule’s Failure to Reform Pharmacy DIR [news release]. Alexandria, VA; May 16, 2019: NCPA website. Accessed May 17, 2019.
  • CMS Takes Action to Lower Prescription Drug Prices and Increase Transparency [news release]. Baltimore, MD; May 16, 2019: Accessed May 17, 2019.

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