The Centers for Medicare & Medicaid Services (CMS) announced on April 5, 2019, a new Medicare Part D demonstration to address the potential implementation of the recent proposed rule issued by the U.S. Department of Health and Human Services' Office of Inspector General (OIG) that would exclude from anti-kickback safe harbor protection pharmaceutical manufacturer rebates paid to Part D sponsors, Medicaid managed care organizations and their contracted pharmacy benefit managers (the Proposed Rule).1 If OIG were to finalize the rule to take effect during the 2020 plan year, CMS would then allow Part D sponsors to apply for and participate in the voluntary, two-year demonstration.
Although CMS is still developing further guidance on the model and application process, the demonstration is constructed to narrow the Part D risk corridors and allow the government to assume a greater degree of risk sharing than current thresholds now permit. The demonstration would modify the Part D risk corridors so that once end-of-the-year costs are reconciled, "the government would bear or retain 95% of the deviation between the target amount, as defined in section 1860D-15(e)(3)(B) of the Social Security Act (the Act) and the actual incurred costs, as defined in section 1860D-15(e)(1) of the Act, beyond the first 0.5%."2
CMS provided further insight on the planned demonstration during its hosted industry call on April 8, 2019. Please see below for a summary of key takeaways:
CMS emphasized that its announcement of the demonstration should not be interpreted as a sign of things to come but rather is intended to provide Part D sponsors with as much notice as possible of alternatives that would be available, should the Proposed Rule be finalized, and to "smooth" the transition for sponsors and beneficiaries. The announcement is clearly an acknowledgement by CMS that the proposed changes to the anti-kickback safe harbors could significantly impact the Part D program. CMS urged sponsors to make their own decisions to participate in the demonstration based on each plan's assessment of its rebate arrangements and the anticipated risks involved if the safe harbor changes are implemented. Holland & Knight's Healthcare & Life Sciences Team will continue to monitor any further guidance from CMS or the OIG on these issues.
1 84 Fed. Reg. 2340 (Feb. 6, 2019).
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