The change will allow MA plans to require beneficiaries to begin treatment for a medical condition with the plan-preferred Part B drug therapy and progress to other therapies only if necessary. Existing CMS guidance released in 2012 allowed Medicare Advantage to apply prior authorization but prohibited step therapy.

HHS Secretary Alex Azar noted that by allowing MA plans to use step therapy for Part B-covered products, MA plans will have expanded leverage in negotiations with manufacturers for physician-administered drugs, mirroring the dynamic that already largely exists in the commercial market.

The memo states that this additional flexibility will afford MA prescription drug plans (MA-PDs), which represent about 89% of all MA, the ability to cross-manage between drugs covered by different parts of Medicare. According to the memo, MA-PDs may consider applying step therapy to require a beneficiary to use a Part D product before allowing access to a Part B therapy, or vice versa.

Since the release of its drug pricing blueprint, the administration has signaled its strong interest in increasing competition and management under the Medicare Part B drug benefit. This policy change will give MA-PD plans the flexibility to negotiate across medical and pharmacy benefits and apply utilization controls on Part B drugs without broader system changes that may be required to implement other policy options (e.g., shifting coverage for Part B drugs into the Part D program).

Impact on Medicare Beneficiaries

Importantly, MA plans will still be required to cover all medically necessary Part B drugs for beneficiaries, because MA must offer a benefit package equivalent to that of fee-for-service (FFS) Medicare. In implementing step therapy requirements, MA and MA-PD plans must still comply with Medicare national and local coverage determinations (NCDs and LCDs). An MA plan may implement its own step therapy policies where an applicable NCD or LCD is silent on the matter. Furthermore, under this new policy, step therapy can only be applied to new prescriptions and should not impact beneficiaries who are already receiving an affected medication.

Additionally, CMS stated that any potential new step therapy requirements should be combined with drug management care coordination services and beneficiary participation incentives by MA plans. Care coordination programs must include discussing medication options, offering educational materials about therapeutic options, and implementing adherence strategies.

But the policy also raises questions about patient access to clinically appropriate care. MA plans choosing to apply step therapy to Part B products must disclose that in the plan’s Annual Notice of Change (ANOC) and Evidence of Coverage (EOC) documents provided prior to Medicare Open Enrollment. However, it is unclear if this disclosure would list each individual affected medication or the required step edits. Unlike the robust process of CMS approval of utilization management criteria in Part D, the new guidance does not outline a process for agency approval of step therapy criteria for Part B drugs. Lastly, the CMS memo states that any cross-benefit step therapy requirements should be done in a way that does not increase cost to enrollees, though it remains unclear how MA plans can comply given that bids and premiums are already set for 2019.

Potential Therapeutic Targets

Another stated goal of this administration has been to find new ways to incentivize the development and uptake of biosimilars in the US. The new step therapy policy moves in that direction and could result in plans requiring patients to begin treatment with a biosimilar before progressing to a costlier drug therapy. In the commercial market in 2017, more than one-quarter of payers (27%) required members to step through a biosimilar before utilizing its reference product. Other potential targets for step therapy would likely be biologics that commercial payers have subjected to tighter management, such as those for multiple sclerosis, rheumatoid arthritis and other autoimmune diseases, and oncology support drugs, among others.

What’s Next?

The new step therapy policy in MA will become effective in January 2019, but it is unclear how many plans will move to make major changes in the first year, given that plan bids, premiums, and formularies for 2019 have been finalized. CMS announced it will provide a special 8/17-8/21 window for MA submissions of step therapy edits that impact access to Part D products for 2019. But the memo does not outline if plans should submit changes for step therapy requirements that impact Part B products only in the same window.

CMS expects that allowing MA plans more flexibility in controlling Part B product utilization will enable them to negotiate more effectively with manufacturers. In 2017, the MA program included about 19 million beneficiaries, which represents about 32% of all Medicare enrollment. The Part B step therapy flexibility guidance will not impact FFS Medicare, but improved negotiations in MA could translate to lower average sales prices for drugs in FFS.

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