The CMS will offer a two-year transition for Medicare Part D plans under the administration's proposal to eliminate safe harbor protections for pharmacy benefit managers.
CMS Administrator Seema Verma made the announcement in a Friday . The guidance comes as Part D insurers warn they may hike premiums when the proposed rule is finalized. The administration set Jan. 1 of next year as its target date for implementation and the comment period ends Monday.
"If there is a change in the safe harbor rules effective in 2020, CMS will conduct a demonstration that would test an efficient transition for beneficiaries and plans to such a change in the Part D program," Verma wrote.
The two-year demonstration is optional, and would change Part D's risk corridor structure so that if there's a deviation between a plan's target costs and actual costs beyond 0.5%, the government would assume 95% of the difference.
Verma also clarified that Part D plans should submit their bids for next year "in a form and manner that is consistent with the Anti-Kickback Statute law and regulations in effect as of the bid submission deadline."
A consultant for plans who spoke on condition of anonymity said the guidance bodes well for companies like UnitedHealth Group and Anthem "that have invested in the post-rebate world."
"They get to move forward with a stop-loss—a good deal for them," he said.
He noted that the guidance also indicates that the implementation will "almost certainly" be delayed beyond Jan. 1 of next year.
Meena Datta, partner with the law firm Sidley Austin, sees a suggestion in the effective date of the final rule won't come until after the demonstration finishes, "but that remains to be seen."
"The transition plan should bring greater comfort to Medicare Part D plans as it allows for voluntary participation and an orderly process for implementation of point-of-sale price reductions," Datta said.
Insurance companies and pharmacy benefit managers are lobbying against the proposed rule, which is supported by pharmaceutical companies.
Matt Eyles, CEO of America's Health Insurance Plans, said in a statement earlier this week that the proposed changes "could result in a premium increase of 25% and a $100 billion giveaway to Big Pharma."
As negotiations ramp up on the legislative package on drug pricing expected out of Congress this year, these criticisms of the proposed rule have resonated with some leading Democrats on the Hill.
This week, House Energy and Commerce Chair Rep. Frank Pallone (D-N.J.) during an oversight panel hearing criticized the proposed rule as lacking any provision "that would actually require drug manufacturers to reduce their list prices."
The proposed rule would eliminate safe harbor protections for pharmacy benefit managers, and is meant to get rebates into the hands of Medicare beneficiaries. The policy idea has garnered support among Senate Republicans and even some House Democrats.