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As part of the implementation of the Inflation Reduction Act (IRA), the Centers for Medicare & Medicaid Services (CMS) issued draft guidance on the process for setting the price of medicines. The process is in no way a “negotiation,” and CMS chose to go beyond what was outlined in the statute, taking the most extreme stance to sweep in as many medicines as possible and be as punitive as possible. In comments submitted to CMS, PhRMA outlined key concerns with the guidance and the underlying policy and recommendations to mitigate the harm of the price setting scheme.

CMS is rushing to implement sweeping changes through a flawed process.
CMS provided only 30 days for stakeholders to comment. Failing to follow the traditional notice and comment process is unprecedented for such a major change to Medicare. Furthermore, CMS is not taking any stakeholder feedback on critical parts of the guidance, including the section covering which medicines and forms will be subject to price setting, the statute’s orphan drug exclusion and the special rule for biosimilars. These are all extremely important to patients.

The proposed “negotiation” is a black box that enables arbitrary, politicized decisions.
CMS not only limited opportunities for manufacturers to raise issues of concern and provide feedback, but in some cases they have prohibited any transparency in the process. No external stakeholders – patients, providers, media or anyone else – will have any information about how and why decisions are made until months after the price is set.

CMS also says there will be no more than three and as few as one meeting between a manufacturer and the agency during the price-setting process, and that this engagement cannot occur until the manufacturer’s counteroffer has already been submitted, which is well into the process. CMS has even gone so far as to place a gag clause on manufacturers, specifying they are not to communicate with anyone other than the agency throughout the process and that all documentation, even their own notes, must be destroyed.

Making matters worse, CMS doesn’t even plan to release their explanation for how they’ve set the price of a medicine until months after that price has been imposed. That prevents manufacturers who may have their medicine subject to price setting in the second year from gaining insight into how CMS is making decisions.

The patient perspective is discounted while manufacturers are penalized for innovation.
The guidance shortchanges opportunities for patients and physicians to provide their input and perspective on the value of the medicines selected for price setting. For example, CMS creates only one opportunity for patients and providers to weigh in on the process, and it’s only in writing, using a bureaucratic form that must be submitted shortly after selected medicines are announced. CMS also has no requirement to respond to the stakeholder feedback it receives or state what evidence it intends to use in the price-setting process.

At the same time, CMS proposes to decrease the price for selected medicines that have remaining patents and exclusivities, which would penalize manufacturers for investing in R&D to bring their products to market, identify new uses or improve the administration of medicines over time. This includes, for example, making dosing more convenient, decreasing the number of treatments required or broadening the use to other diseases or patient populations.

Furthermore, CMS is choosing to use an extremely broad definition of a medicine so that any form of a medicine from the same manufacturer with the same core molecule or active ingredient will be swept into the price-setting process. This means a medicine that is only a year old could be price set if it has the same core molecule or active ingredient as another older medicine, even if it represents a significant advancement for patients. This will have significant unintended consequences for patients and will undermine U.S. leadership in biopharmaceutical innovation.

The guidance leaves unaddressed concerns about access to medicines under Medicare Part D.
Price setting, layered on top of the Part D redesign, will have significant impacts on the structure of Part D and could negatively impact patient access to medicines. Part D plans are likely to impose even more aggressive utilization management to limit market share for medicines that are not subject to price setting and demand higher rebates for formulary access. They are also likely to expand on a current trend toward more formulary tiers and raise the number of medicines subject to maximum coinsurance requirements, increasing the number of medicines placed on non-preferred and specialty tiers. All of this points toward a future where beneficiaries have less access to medicines because of fewer plans and skinnier formularies - the opposite of what policymakers intended.

This is an unprecedented policy with significant implications for our entire health care system. Rather than take a thoughtful, careful approach in this first year, CMS chose the opposite. Given the stakes for patients, CMS should be taking a more measured approach when implementing the price setting provisions of the IRA.

Read our full comments here.

Nicole Longo

Nicole Longo is Deputy Vice President of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.

Nicole Longo

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