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New Medicare Part B Drug and Part D Drug Rules issued

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Most Favored Nations Drug Pricing for Part B Drugs

On September 13, 2020, President Trump issued an Executive Order directing the Secretary of HHS to take steps to implement a rulemaking plan for a model under which Medicare will pay the Most Favored Nation (MFN) price for certain Part B drugs. The MFN price is defined as the lowest price for a drug sold in a member country of the OECD with a comparable per capita GDP.

On Friday, November 20, 2020, an interim Final Rule implementing the MFN drug pricing proposal in Part B was released. Key provisions of the Rule include:

  • The model will apply nationwide from January 1, 2021, which is 20 days before the comment period closes, until December 31, 2027.
  • The top 50 Medicare Part B drugs by spending will fall under the purview of the model.
  • Payments for these drugs would be based on the lowest price found in an OECD country with per capita GDP of 60% of the U.S. – or 22 countries.
  • The model will produce an estimated program savings of $85 billion. OACT also estimates that the model will save beneficiaries $28.5 billion due to reductions of the Part B premium.
  • All Medicare providers will be paid the MFN price for these drugs INSTEAD of receiving ASP+6% reimbursement. Importantly, the MFN model will put providers at risk to acquire drugs at or below the MFN reimbursement provided by CMS. The payments will be made in 2 parts:
    1. The model will phase in the drug price changes over 4 years (25% per year) from the ASP price to the MFN price.
    2. A flat add-on payment per dose that will be the same for ALL drugs under the model. This flat add-on is intended remove any incentive for providers to furnish higher-cost drugs. This will be $148.73 for Q1 2021.
  • Beneficiaries will pay lower coinsurance on model drugs, and cost-sharing on the flat add-on payment will be waived.
  • The model includes financial hardship protections for providers that see their revenue significantly impacted.


The CMS Fact Sheet on the Most Favored Nation model is available on the CMS website and the entire 258 page MFN Model Interim Final Rule with Comment Period is available here.

The LUGPA Health Policy team is at work analyzing this interim final rule. Initially, it appears that five Part B drugs commonly used by urologists will be affected by the rule. LUGPA will continue its analysis and will report on the implications of this rule to our members. EDIT: On Nov. 24, LUGPA released it's Statement on Most Favored Nation Drug Policy.  LUGPA strongly opposes the interim final rule, which would impose a “Most Favored Nation” model because it will undermine the doctor-patient relationship and threaten patient access to cancer care. 

Medicare Part D Rebate Rule

Also on Friday, November 20, 2020, the Department of Health and Human Services Office of Inspector General (“OIG”) released a Final Rule entitled “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection” (hereinafter, the “Rebate Rule”). This rule amends the discount safe harbor regulation under the Anti-Kickback Statute (AKS) to eliminate protection for price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors, or pharmacy benefit managers (PBMs) under contract with them, under the Medicare Part D program.

In addition to eliminating safe harbor protection for price concessions in the Part D program, OIG proposes to create two new safe harbors effective 60 days after the publication of the final rule in the Federal Register (scheduled for November 30, 2020), the first of which would protect certain point-of-sale (POS) reductions in price offered by manufacturers, and the second that would protect certain PBM service fees. The current safe harbor protection for rebates would end later, on January 1, 2022 (in advance of the CY 2022 plan year), to allow Part D plans adequate time to “come into compliance and to minimize any disruption.”

Most notably, the rule delays the amendment to the discount safe harbor until January 1, 2022. In addition, while the Proposed Rule issued in 2019 had proposed to exclude protection for rebates paid to Medicaid managed care organizations (MCOs), the Final Rule only eliminates safe harbor protection under the discounts safe harbor for Part D plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDPs).

In short, the primary provisions in the Final Rule include:

  • Creation of a New Safe Harbor for POS Price Reductions. Effective December 30, 2020, OIG is creating a new safe harbor to protect price reductions paid by manufacturers to PDPs, MA-PDs, and Medicaid MCOs, that are fully reflected at the point of sale (POS).
  • Creation of a New Safe Harbor for PBM Services. Also effective December 30, 2020, OIG is creating a new safe harbor to protect fair-market-value (FMV) service fees paid to PBMs by manufacturers.
  • Amendment to the Discount Safe Harbor. Effective January 1, 2022 and in advance of the CY 2022 Part D plan year, safe harbor protection will be eliminated for manufacturer rebates paid directly (or indirectly through a PBM) to Part D prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs). OIG clarifies that it intends the discount safe harbor to continue to protect rebates extended to other entities, including Medicaid MCOs, wholesalers, hospitals, physicians, pharmacies, and third-party payors in other federal healthcare programs.


LUGPA’s Health Policy team is continuing to review this new rule, with particular attention as to its impact on groups with in-office dispensing. Additional information will be sent as it becomes available.