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Most Favored Nation Rule’s Impact on Medicare Beneficiaries OOP Costs

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New Avalere analysis finds that most Medicare fee-for-service (FFS) beneficiaries would not see a substantial reduction in their out-of-pocket (OOP) costs as a result of the Most Favored Nation (MFN) model.

On November 27, the Centers for Medicare & Medicaid Services (CMS) published the “Most Favored Nation” (MFN) Model Interim Final Rule with Comment Period (IFC). This IFC finalizes a Center for Medicare & Medicaid Innovation demonstration that will lower Part B FFS drug payment to the lowest price that drug manufacturers receive in certain other developed countries. The 7-year MFN model is mandatory and nationwide in scope, and it will include providers treating the vast majority of FFS Medicare Part B beneficiaries. The CMS has projected the demonstration would save the Medicare and Medicaid programs billions of dollars over 7 years, but stakeholders have sought to better understand the specific impact on beneficiaries.

Avalere’s analysis finds that the vast majority of beneficiaries in Medicare FFS would not see a reduction in their OOP costs from the MFN model because more than 94% of FFS Part B beneficiaries using MFN drugs have supplemental coverage (e.g., Medigap, employer sponsored insurance, Medicaid) that covers some or all of their cost-sharing for Part B drugs. Avalere estimates that less than 1% of beneficiaries in Medicare would see reduced OOP costs (in a given year) if the demo were to include the 50 drugs listed in the IFC.

This result is a small number of beneficiaries taking 1 of the 50 included drugs (less than 1 out of 10 Part B FFS enrollees), and the low number (approximately 6%) of beneficiaries using these MFN drugs who have no supplemental insurance. Avalere estimates that the patient OOP responsibilities for these individuals taking MFN drugs without supplemental coverage is approximately 5% of the total patient responsibilities for these products in Medicare FFS.

This finding is consistent with an earlier Avalere analysis that found similar impact for the 27 drugs that would have been included under the draft International Pricing Index model.

Funding for this research was provided by the Pharmaceutical Research and Manufacturers of America. Avalere maintained full editorial control.


Avalere modeled the beneficiary impact of the proposed MFN model using the Medicare Current Beneficiary Survey (MCBS) data for 2017. MCBS data, along with MedPAC reports, were used to estimate the number of Medicare FFS beneficiaries taking any of the 50 MFN model drugs included in performance year 1 with no supplemental coverage.

For each MCBS survey respondent, Avalere summarized their 2017 insurance enrollment by month and excluded individuals without 12 months of enrollment in Part A and Part B. Avalere also excluded beneficiaries with any Medicare Advantage (Part C) enrollment during the year. All results are weighted to reflect the full Medicare population using survey weights. To identify beneficiaries using MFN drugs, Avalere used the MCBS’s research claims files and identified any beneficiary that received a drug that was included in the first year of the MFN model as outlined in the IFC.

Avalere attributed a beneficiary to a source of supplemental coverage (e.g., employer-sponsored insurance [ESI], Medicaid, Medigap and other private plans, or other) if they had more than 6 months of enrollment in that plan. Avalere then used a hierarchy to place a beneficiary into a single supplemental coverage group: 1) Medicaid, 2) ESI, 3) Medigap, 4) Other. Any individual who was not assigned to one of these 4 groups was placed into the “No Supplemental Coverage” group. Some beneficiaries may have multiple sources of supplemental coverage (e.g., ESI and Medigap) or may have been enrolled in coverage for 6 months or fewer during the year.

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