Medicare releases updated guidance ahead of drug price negotiations

The Centers for Medicare and Medicaid Services (CMS) shared revisions to its drug pricing negotiation guidance Friday, adding more transparency to the process.

The powers to negotiate, a result of the passage of the Inflation Reduction Act (IRA), has placed significant pressure on the pharmaceutical industry as it awaits the start of formal negotiations with CMS over the price of drugs covered under Medicare.

And as the industry waits on the list of the first drugs that will be targeted for their high prices this fall.

Drug stocks did not move on the news Friday, which came out just before the long holiday weekend.

"The very few substantive changes to the final guidance demonstrate CMS saw this as a box checking exercise, not an opportunity to mitigate the negative impacts this price setting policy will have on patients or the broader health care sector," said industry lobbying group PhRMA in a statement Friday.

Several lawsuits have already been filed against the US Department of Health and Human Services (HHS), which oversees CMS, calling the process unconstitutional and claiming it was not set up as a voluntary or transparent process.

CMS Administrator Chiquita Brooks-LaSure told reporters in response to questions about the lawsuits, "We feel that the law is on our side."

AARP's SVP of government affairs, Bill Sweeney, said he thinks the law is airtight and that the industry will be forceful in its threats to try and stop it from going into effect.

"We're not at all surprised the drug companies filed against the law even before it's come into effect," Sweeney said. "The drug companies' incentive (is) to try to block this thing in any way they can and to keep charging American taxpayers and seniors on Medicare these exorbitant prices."

The industry has also threatened the negotiations would disincentivize innovation in the industry and lock Medicare enrollees out of access to live saving drugs.

In the revised guidance Friday, the agency said it would share more information and is willing to make the process more transparent.

TAMPA, FLORIDA - FEBRUARY 09: U.S. President Joe Biden speaks during an event to discuss Social Security and Medicare held at the University of Tampa on February 09, 2023 in Tampa, Florida. The visit comes two days after his State of the Union address in Washington, where accused some republicans of wanting to cut social security and medicare. (Photo by Joe Raedle/Getty Images)
U.S. President Joe Biden speaks during an event to discuss Social Security and Medicare held at the University of Tampa on February 09, 2023 in Tampa, Florida. (Photo by Joe Raedle/Getty Images)

"CMS will not publicly discuss ongoing negotiations prior to the release of the explanation of the maximum fair price (MFP) unless a (drug maker) publicly discloses information regarding the negotiation process. In addition, CMS will treat as proprietary certain data submitted by a (drug maker)" unless the manufacturer chooses to go public with the data first, the guidance said.

PhRMA said in a statement that the changes don't go far enough.

"While we appreciate CMS recognizing it went well beyond legal limits and rescinding the proposed 'gag clause' in the final guidance, CMS will continue to limit opportunities for manufacturers to raise issues of concern and provide feedback," it said.

"We received more than 7,000 thoughtful and constructive public comments on the initial guidance," Brooks-LaSure said. "We considered every bit of feedback to ensure our rules of the road for the Medicare negotiations are focused on the people we serve."

Medicare director Dr. Meena Seshaman also clarified during a call with reporters that the sharing of information includes that which is shared among manufacturers, and that any shared information should also be done in line with rules for anti-competitive practices.

The focus, she said, is on fulfilling the intent of the Congress in passing the law to help lower drug costs.

At the same time, a number of companies are losing exclusivity for blockbuster drugs, likely stoking increased competition as generics and biosimilars come to market. AbbVie (ABBV) lost exclusivity on its blockbuster Humira this year and already has biosimilar competition, while Johnson & Johnson's (JNJ) Stelara will lose its patent this fall.

"The negotiation process is for those drugs that do not have meaningful competition, and where there is meaningful competition then those drugs would no longer be selected," Seshamani said.

"The program involves no genuine 'negotiation' at all. Instead, it compels pharmaceutical manufacturers to accept prices that are capped at whatever price HHS chooses, while setting no meaningful constraints on HHS’s new price-setting powers," according to the lawsuit filed by PhRMA.

Other changes include parameters for choosing drugs and an emphasis on the fact that manufacturers can opt out of the process, but will face a hefty tax — another element of the bill called unconstitutional in the lawsuits.

"The Drug Pricing Program then forces manufacturers to deliver a government-approved message, compelling them to 'agree' to the government-dictated price...under threat of a crippling excise tax for nonacquiescence. The 'tax' itself is staggering, reaching as high as 1,900% of a manufacturer’s total U.S. revenues for a drug," the lawsuit said.

Seshamani said Friday that the agency has had an open door and proactively reached out with meetings with all stakeholders. "We want to implement this law in the most thoughtful way possible and we will continue to implement in this fashion," Seshamani said.

AARP's director of health care costs and access, Leigh Purvis, told Yahoo Finance Friday that CMS does seem to be fighting for patients, but is wary of criticism it is getting.

"They are being responsive. I think to the extent that we're seeing criticism, I do think that what we're seeing, at least today, is an indication that they hear that as well. And so I think they're doing a good job of trying to bring everyone to the table," Purvis said.

CMS looks to still be on track to publish the first 10 drugs selected for negotiated prices in September.

Follow Anjalee on Twitter @AnjKhem

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