Avalere Experts Discuss Effects of Inflation Reduction Act, EOM, Health Care Disparities

Nonstop activity this year in Washington, DC, will keep health care interests and especially pharmaceutical manufacturers busy as they work to understand and implement provisions of the Inflation Reduction Act (IRA), which features provisions to hold down out-of-pocket costs for prescription drugs in Medicare and limit what the government pays as well.

On September 7, Avalere Health convened its experts for an hourlong rapid-fire webinar, “Preparing for Legislative Change and Connecting Equity and Outcomes,” which examined what IRA implementation will look up close. The webinar covered other recent actions that affect drug sponsors and health care providers, such as the announcement of the Enhancing Oncology Model (EOM).

IRA Highlights: Changes in Medicare Negotiation, Inflation Rebates, Part D Redesign

The IRA, signed August 16, will be implemented over 14 months.

“The policymaking doesn’t stop now that Congress has acted,” said Matt Kazan, managing director,“There are a ton of details in this now law that are yet to be decided. And that is in CMS and HHS’s court to figure out.”

Kazan said CMS and HHS will undertake a program guidance—this process makes things move quickly and is both faster and harder to influence than the normal rulemaking comment process, but it’s also harder to track.. HHS may hire as many as to hire 100 new employees, he said, which could shape how the policy works.

Ryan Urgo, managing director of Health Policy,, said that the IRA was very specific in some areas but ambiguous in others. Urgo said areas that will need clarification include:

• the implementation of the maximum fair price (MFP) associated with the policy for negotiating drug pricing with Medicare;
• what the information exchange will look like between HHS and drug manufacturers in negotiations;
• how zero cost sharing for patients for vaccines and insulin caps will work; and the “smoothing” policy in Part D, which refers to the provision that would allow some beneficiaries to pay cost-sharing in equal amounts over the year instead of higher lump sums.

Kazan and Urgo also talked about the negotiation process that is introduced in the IRA, which requires companies to negotiate drug prices with HHS for the first time. Kazan said that negotiations for the first year will start in 13 months. He said all companies that have products that could be selected for negotiations should be thinking about the contracting and rebaiting strategy with the Part D plans.

“The law says that if you are a selected drug, you must be covered by a Part D plan. But the law is silent on rebate arrangements, utilization, management forumlary, etc. So, thinking about how Part D plans are going to react to this policy is just as important as thinking about the negotiation process itself for the manufacturer,” said Kazan.

Urgo pointed to the MFP discount, which is excluded from the average manufacturer’s price (AMP) calculations but included in Medicaid Best Price, which will lead to changes in Medicaid rebate exposure and the 340B program.

“The legislative text appears to say that the MFP discount will have a recursive and dampening effect on [average sales price] and ASP calculations. That will require a complete rethink in how manufacturers of Part B drugs are thinking about their contracting strategy and their engagement with providers,” he said.

Kazan highlighted Congress’ late decision to remove commercial volume from what is paid related to inflation rebates, which he said changes the financial obligation that manufacturers will have to pay and also “changes the dynamics in the thinking of a manufacturer about future pricing decisions and weighing commercial versus Medicare volume as part of that calculation.”

Urgo pointed out that the inflation adjustment period will start right before the applicable period. “Manufacturers will know what their target price needs to be but they won’t have a lot of time before that applicable period actually begins. So, to the extent that pricing strategy and price increases are typically thought out months in advance, that process is likely going to need to be truncated quite a bit.”

Medicare Part D redesign will likely begin in earnest in 2025, but some changes will be brought to the table by 2024, including a 5% cap on beneficiaries and changes to low-income subsidy eligibility.

“There will be a lot of very practical benefits associated with Part D redesign when itcomes to that new out-of-pocket cap and the smoothing policy. So, we really can’t lose sight of the affordability benefits for patients. But that will come at a cost for manufacturers when itcomes to negotiations with plan sponsors,” said Urgo.

He said that pricing reimbursement and access teams should work together to start thinking about the real-world evidence that exists for products that could be negotiated and what type of new purchasing agreements could be required to keep providers whole. Kazan said that business units should stay informed on the activities and decisions coming out of CMS and the HHS to keep ahead of the decisions, and public affairs offices should help to translate the negotiation information for stakeholders that could sway the upcoming decisions.

Preparing for EOM to Roll Out

The successor to the Oncology Care Model (OCM), the EOM, will be rolling out on July 1, 2023. According to Blair Burnett, a consultant for Avalere Health, this model will be looking at cancer care more holistically but still within the total cost of care model approach.

One of the big changes in this new model is that there will be a reduction in cancer types that are included, with EOM only covering 7 of the 21 cancer types that OCM did. The covered cancers include breast, lymphoma, small intestine/colorectal, prostate, and chronic leukemia. “Despite the reduction in included cancer types, the 7 implicated in EOM will account for nearly half, about 48%, of episodes in OCM,” said Burnett.

The monthly enhanced oncology services (MEOS) payment, which is intended to support larger care transformation activities, has been reduced from $160 per beneficiary per month under OCM to $70 per beneficiary per month under EOM. However, practices will receive $100 per month when they treatpatients that are “dually eligible,” meaning they receive both Medicare and Medicaid. There are 2 practice redesign risk models, and electronic patient reported outcomes will be mandatory in year 3.

Maddi Davidson, a consultant with Avalere Health, said that it isexpected many participants to be incentivized to switch to the EOM because of the methodology changes, ongoing efforts and the overall transition toward value-based care, and the timing of the model. She explained that the EOM payment methodology was overhauled from OCM to make prices more accurate and more attainable because the price will be set using 7 individual cancer regression models compared with only 1 in the OCM. Certain diagnosis-related groups were also excluded from the calculations, which may appeal to hospital-based practices.

Burnett said that Avalere is recommending that all life science companies and manufacturers that will be implicated in these changes “to connect with their priority accounts to understand how these necessary and methodological adjustments that practices are recommending and considering for participation and how that’s going to support them or not and how those practices are engaging with external stakeholders.”

The new EOM will be addressing equitable cancer care in the roll out by working with the Cancer Moonshot Initiative to close the gaps and address cancer disparities that were exacerbated with the COVID-19 pandemic. Implementation of patient reported outcomes and health resource screening are the 2 ways that EOM is hoping to close health disparity gaps.

Addressing and Reducing Health Care Disparities

Companies are beginning to look toward addressing health care disparities and health equity. But the first step to doing so is often the hardest to begin.

Brigit Kyei-Baffour, associate principal, said that all companies should start with the data. “There are multiple ways in which stakeholders can leverage data to address health equity challenges that are impacting their specific patient communities and use data to develop solutions to drive favorable outcomes,” she said.

Ensuring that algorithms collecting data aren’t biased and tailoring that data to the specific population of interest is just one way that companies can get started with addressing health equity.

Sarah Alwardt, senior vice president of Advisory Services, agreed, saying that real world data should always be where companies begin, and to take within context. She also spoke about how patient perspectives are becoming more valuable in addressing these issues. Patients and caregivers can give their perspective after the data is collected to truly understand the desires of the patients and what outcomes they want from their treatments.

Combining patient perspective with data can help companies understand some actionable next steps and future strategies to close identified through these perspectives.