5 Proposals in Alex Azar's Drug Price Plan

The President and his new HHS secretary concur that drug prices in the United States are too high, and in a press briefing yesterday, Azar said that he has been “working a great deal on these issues already,” according to a Bloomberg report.

The plan, expected to be released on Monday, includes several proposals including capping out-of-pocket costs for patients and moving prescription medications currently covered under Medicare Part B over to the Part D program.

Here’s a look at 5 strategies presented by Azar’s drug price regulation plan:

1. Shuffling Part B drug coverage. Part B drugs, which are usually complex drugs that require administration in a clinic or physician’s office, are reimbursed by Medicare at a fixed rate. However, according to the proposal, reassigning these drugs under the Part D program—which currently covers a majority of retail prescription drugs—would leave room for price negotiation between the pharmaceutical industry and private administrators who would be running the program for the government.

2. Restructuring Medicare Part B physician reimbursement. In 2016, CMS had proposed a 5-year Part B demonstration program that reduced provider reimbursement for infused or injected drugs—the pilot recommended reducing reimbursement from average sales price (ASP) plus 6% to ASP plus 2.5%, but adding a flat payment of $16.80 per drug/day. However, under tremendous pressure from care providers, pharmaceutical manufacturers, and lawmakers, CMS shelved the pilot. Now, according to Azar’s plan, physicians would be paid 3% over the ASP.

3. Mandate charity care for 340B hospitals. The 340B drug discount program has seen significant discord over the years. The most recent update came when CMS finalized a reform under the hospital Outpatient Prospective Payment System, which will adjust payment for drugs purchased through the 340B program to ASP minus 22.5%, instead of ASP plus 6%—rural sole community hospitals, certain cancer hospitals, and children’s hospitals, however, are exempt from this reform.

The new HHS plan states that 340B hospitals can retain savings from the drug discounts only if they provide a threshold level of charity care.

4. Cap Part D spending. Coverage policies for the Part D donut hole remain an ongoing issue. The Part D cost-sharing structure has been proven to create a significant financial burden for specialty drug users, and studies have underscored the need to implement annual as well as monthly out-of-pocket spending limits to ensure continued patient access to treatment.

The newly passed Senate budget deal requires brand-name manufacturers to cover 70% of drug costs for seniors who fall in the donut hole, 20% more than currently required. The Azar plan also creates a cap on Part D spending.

5. Drug price negotiation for State Medicaid programs. The proposal also includes recommendations for a pilot program whereby state Medicaid programs can negotiate formularies and drug price discounts, like a private drug plan would. This flexibility is expected to allow states provide better care for their low-income enrollees.