Red flag raised on CMS indication-based formulary policy


Physician groups are expressing concerns regarding a new policy that will allow indication-based formulary design in the Medicare Part D prescription drug benefit.

Pills and capsules atop a spread of $100 bills Kenishirotie/Thinkstock

The Centers for Medicare & Medicaid Services announced the new policy in an Aug. 29 memo to Part D plan sponsors.

According to a fact sheet issued by CMS on the same day, indication-based formulary design “is a formulary management tool that allows health plans to tailor on-formulary coverage of drugs predicated on specific indications.”

Current Part D policy requires plan sponsors to cover all Food and Drug Administration–approved indications for each drug that is on a plan formulary. Sponsors can begin to implement the new indication-based formulary design policy for plans issued in 2020.

The memo notes that, if a Part D plan sponsor chooses to opt into this policy, “it must ensure that there is another therapeutically similar drug on formulary for the nonformulary indication. For example, if a tumor necrosis factor (TNF) blocker is FDA-approved for both Crohn’s disease and plaque psoriasis, but the Part D plan will include it on formulary for plaque psoriasis only, the plan must ensure that there is another TNF blocker on formulary that will be covered for Crohn’s disease.”

Beneficiaries can use the exceptions process to get coverage for a drug that has an indication not on the formulary.

Seema Verma CMS

Seema Verma

“By allowing Medicare’s prescription drug plans to cover the best drug for each patient condition, plans will have more negotiating power with drug companies, which will result in lower prices for Medicare beneficiaries,” CMS Administrator Seema Verma said in a statement.

However, physician groups should be concerned about the definition of “best drug.” Is this definition based upon efficacy, results of clinical trials, clinical effectiveness research, or just cost? Will there be transparenecy surrounding rebates?

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