Health Law Daily Indication-based formulary design to diversify Part D formularies, lower prices
Thursday, August 30, 2018

Indication-based formulary design to diversify Part D formularies, lower prices

By Patricia K. Ruiz, J.D.

CMS will offer Medicare Part D plans new tools and flexibility to expand drug choices and lower drug prices for patients, incorporating indication-based utilization management (UM) in formulary design to address the challenge of high drug costs. The indication-based formulary design will ensure beneficiaries receive individualized drug treatment targeted to meet their needs (CMS Letter, August 29, 2018).

Current policy. Part D sponsors are permitted through prior authorization (PA) requirements to vary approval criteria for specific indications if their CMS-approved PA clearly defines the criteria. The Medicare Plan Finder indicates whether certain formulary drugs are subject to PA but does not specify detailed clinical criteria that a Part D plan may require before authorizing coverage. Part D sponsors must post their approved PA criteria on their websites to make the requirements transparent to beneficiaries, prescribers, and stakeholders. Under current CMS policy, each on-formulary drug is covered for all indications approved by the FDA, except those statutorily excluded.

Indication-based formulary design. Beginning with the 2020 plan year, CMS will allow Part D sponsors to institute indication-based formulary design in Part D. Under indication-based formulary design, plans negotiate formulary coverage based on specific indications, and only certain indications are considered to be on-formulary for a given drug. Providing Part D plans with the flexibility to employ new formulary tools would allow them to better negotiate for high-cost prescription drugs, and the additional negotiation leverage with manufactures has the potential to reduce beneficiary and program costs. Under this design, if a Plan D sponsor will be limiting on-formulary coverage for drugs to certain indications, it must ensure there is another therapeutically similar drug on the formulary for the non-formulary indication.

This design is expected to increase the number of drugs available on formularies and will promote diversity of formularies. Beneficiaries will benefit from increased access to more drugs at lower prices, helping ensure beneficiaries receive individualized drug treatment targeted to meet their needs.

Submission process. If a Part D sponsor intends to limit formulary inclusion of a Part D drug to only certain FDA-approved indications, the indication information must be submitted. Sponsors must update beneficiary materials for calendar year 2020 to ensure indication limitations are displayed to enrollees and must disclose that some drugs may be subject to the requirements of indication-based formulary design.

MainStory: TopStory CMSLetters CMSNews DrugBiologicNews PartDNews PrescriptionDrugNews

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