CMMI releases interim final rule detailing the payment model for separately payable Part B drugs

• The Center for Medicare & Medicaid Innovation released an interim final rule detailing the long-awaited payment model for separately payable Part B drugs, the Most Favored Nations (MFN) Model.
• The model will require participation, beginning nationally Jan. 1, 2021, of all Medicare providers and suppliers (with certain exceptions: See blog article for detail) that receive separate Medicare Part B fee-for-service payment for the model’s included drugs. 
• The mandatory model will operate for seven years, from Jan. 1, 2021 to Dec. 31, 2027.

On Nov. 20, the Center for Medicare & Medicaid Innovation (CMMI) released an interim final rule detailing the long-awaited payment model for separately payable Part B drugs, the Most Favored Nations (MFN) Model. The MFN will test paying Part B drugs at comparable amounts to the lowest adjusted price paid by any country in the Organisation for Economic Co-operation and Development (OECD) whose GDP is comparable to the United States. Initially, the model focuses on a set of 50 separately payable Medicare Part B drugs that encompass a high percentage of Medicare Part B drug spending.

The model will require participation, beginning nationally Jan. 1, 2021, of Medicare providers and suppliers, with certain exceptions — children’s hospitals, PPS-exempt cancer hospitals, CAHs, IHS facilities, FQHCs, RHCs, non-subsection d hospitals paid on reasonable cost, extended neoplastic disease care hospitals, and participants in certain CMMI models — that receive separate Medicare Part B fee-for-service (FFS) payment for the model’s included drugs. 

The mandatory model will operate for seven years, from Jan. 1, 2021 to Dec. 31, 2027. MFN participants will include Medicare-participating physicians, non-physician practitioners, supplier groups, such as group practices; hospital outpatient departments (HOPDs), including 340 covered entities, Ambulatory Surgical Centers (ASCs) and other providers and suppliers that receive separate Medicare Part B fee-for-service payment for the model’s included drugs.

Currently payment for separately payable Part B drugs is typically based on the manufacturer’s reported average sales price (ASP) plus 6% of the ASP as an add-on amount. For the MFN, payment will be based on global prices and include a flat add-on amount for each dose. The MFN Price will be phased-in over the first four years, increasing by 25% per year for years one through four, and then continuing at 100% of the MFN price for years five through seven. Additionally, Medicare will pay MFN participants a flat add-on payment for each dose that is uniform for all included drugs in the MFN Model. The per-dose add-on for the first quarter of 2021 will be $148.73.

Takeaway

The payment impact of the model could be significant. The fact sheet associated with the model, in justifying the need for a national mandatory pilot states that, “One of the largest drivers of increasing Medicare spending is the growing prices for physician-administered separately payable Medicare Part B drugs, which have risen an average of 11.5 percent annually since 2015 …”CMS in its impact analysis estimates that the MFN Model will result in savings of $85.5 billion, net of the associated change in the Part B premium, in Medicare Part B spending.”

The timing  —  60 days before inauguration day  —  is not coincidental. This is the last day that a rule could be released and go into effect before President-Elect Biden assumes the presidency, making it harder for the new administration to stop the rule. However, it’s unlikely the new administration will try given that the Obama administration issued a RFI on a conceptually similar model that was never fully developed. But that does not mean that the rule will ultimately be implemented in its current incarnation.

It is anticipated that drug manufacturers will sue to stop the rule. And they may have several strong legal arguments that would at least delay, if not overturn the rule. First, issuing the rule as an Interim Final Rule may run afoul of the Administrative Procedures Act as impacted stakeholders have been deprived of an opportunity to comment on a regulation that has a significant economic impact on them. While the administration has issued many interim final rules this year to address issues created by the Public Health Emergency (PHE), it’s going to be difficult to convince a court that this rule addresses an issue that rises to the level of a PHE. Second, the rule is issued as a CMMI model. While CMMI has broad authority to test new payment models, is it really a payment model test if there are no comparative groups? My guess is no, but that’s likely going to be up to a court to decide.