The Most Favored Nation Model for Medicare Part B Drugs

The majority of Medicare beneficiaries rely on Part D for their prescription drug coverage. However, many people, especially those who have cancer and certain rheumatologic conditions, rely on Part B medications for treatment.

The Centers for Medicare & Medicaid Services (CMS) has put forth a policy that changes how these medications are covered starting on January 1, 2021. Will you be affected?

Coverage for Part B Drugs

Part B drug coverage is not all-inclusive. It is limited to certain oral medications, including some types of chemotherapy. It also covers injectable medications when those medications are administered by a trained professional.

This includes chemotherapy, immunotherapy, and biologic agents used to treat inflammatory conditions (e.g., Crohn’s disease, psoriasis, rheumatoid arthritis, and ulcerative colitis). Note this is only a partial list of covered drugs.

Medical providers purchase these drugs for their offices. However, their costs go above acquiring the drugs themselves. These medications must also be safely stored and prepared for use. That requires proper equipment and staffing.

For this reason, Part B has traditionally paid providers 6% above the wholesale cost of the drug to account for those added costs. Medicare beneficiaries then pay 20% of the cost for each dose.

CMS publishes a Medicare Part B Drug Spending Dashboard that lists each drug covered by Part B along with its average sales price, the number of beneficiaries who use that drug, and total spending per beneficiary and by the Medicare program at large. Of note, Medicare Part B spent $29.8 billion on prescription drugs in 2019.

The Most Favored Nation Model

With an increase in Part B drug spending by $10.4 billion from 2015 to 2019, CMS aims to cut back on costs. To do that, they announced the Most Favored Nation (MFN) Model on November 27, 2020, an interim final rule which will take effect on January 1, 2021 and will continue through 2027.

Noting that other developed countries pay considerably less for the same prescription medications, the model looks at the average sales price for Part B covered drugs in countries that are part of the Organization for Economic Co-operation and Development (OECD) and that have a gross domestic product (GDP) per capita that is at least 60% of the U.S. GDP per capita.

The plan is to phase in the average sales price (ASP) from other nations until the United States is only paying rates comparable to those nations.

Specifically, Medicare will reimburse physicians at the following rates:

• 2021: 25% MFN ASP + 75% US ASP
• 2022: 50% MFN ASP + 50% US ASP
• 2023: 75% MFN ASP + 25% US ASP
• 2024 and beyond: 100% MFN ASP

Also, CMS will also stop the 6% add-on payment. Instead, it will add a flat rate per dose which will be calculated quarterly. The intention may be to disincentivize physicians from opting to purchase the most expensive medications.

Altogether, CMS estimates the federal government would save $87.8 billion on Part B drugs over the seven years of the program.

The 50 Medications to Watch

Not every Part B drug will qualify for the Most Favored Nation Model. CMS specifically excludes oral medications, compounded drugs, intravenous immunoglobulin, and vaccines from the program. Also, any treatment that receives FDA approval or emergency use authorization for COVID-19 will not be considered for Most Favored Nation adjustments.

Instead, CMS has targeted 50 injectable medications that have resulted in the greatest amount of Medicare Part B spending. CMS will add medications to the list each year.

These medications include, but are not limited to, the following:

Biologic and biosimilar agents used for noncancerous conditions: Abatacept, aflibercept, benralizumab, certolizumab, eculizumab, golimumab, infliximab, mepolizumab, natalizumab, ocrelizumab, ranibizumab, rituximab, romiplostim, tocilizumab, ustekinumab, vedolizumab

Chemotherapy and immunotherapies:

• Breast cancer: Paclitaxel, pertuzumab, trastuzumab
• Colon cancer: Aflibercept, bevacizumab, cetuximab, nivolumab
• Lung cancer: Atezolizumab, bevacizumab, nivolumab, paclitaxel, pembrolizumab, pemetrexed
• Multiple myeloma: Carfilzomib, daratumumab, elotuzumab, Velcade
• Prostate cancer: Leuprolide, sipuleucel-T
• Other types of cancer: Atezolizumab, Bendeka, bevacizumab, brentuximab, cetuximab, durvalumab, ipilimumab, lanreotide, nivolumab, octreotide, paclitaxel, pembrolizumab, rituximab, Velcade

Medications for severe anemia not caused by end-stage renal disease:

• Darbepoetin alfa
• Epoetin alfa

Osteoporosis medications: Denosumab

Problems and Legal Issues

Although the Most Favored Nation Model would decrease Medicare spending, it could come at a greater cost—access to care.

Multiple medical organizations have noted that providers may find it cost-prohibitive to purchase certain drugs. Medicare will be paying them lower reimbursements but pharmaceutical companies may charge the same rates they always have.

If a provider’s office is unable to afford certain drugs, their patients may have to seek care from another provider or forego care altogether. In the Federal Register (Table 11), CMS estimates that 9% of patients may lose access to treatment in the first year of the model. That number is projected to increase to 19% by 2023.

Knowingly risking access to care as a way to save money is a moral issue. However, in this case, legal issues are also raised. CMS published the Interim Final Rule in November 27, 2020, noting it was mandatory nation-wide and set to take effect on January 1, 2021. The government would accept comments on the policy through January 26, 2021.

The timeline of the regulation may violate the Administrative Procedure Act. CMS went directly to an Interim Final Rule before issuing a Notice of Proposed Rulemaking.

Not to mention, the rule will take effect during the comment period and will therefore not immediately incorporate recommendations from professionals and medical organizations. All in all, there was only five weeks lead time for offices to adapt and make changes to their workflows.

The American College of Rheumatology has argued against the Most Favored Nation Model. Further, the Association of Community Cancer Centers, the Global Colon Cancer Association, the National Infusion Center Association, and Pharmaceutical Research and Manufacturers of America have come together to file a lawsuit against the rule. A separate lawsuit was filed by the Community Oncology Alliance. On December 23, a U.S. District Court judge in Maryland put a 14-day restraining order on the policy change while the court reviews it.

In August 2021, CMS rescinded the the Most Favored Nation Model interim final rule.

A Word From Verywell

Part B medications cost Medicare billions every year. To cut costs, CMS has proposed the Most Favored Nations Model as a way to decrease the cost of 50 expensive drugs. These drugs would be reimbursed at lower rates comparable to what other developed nations pay.

Unfortunately, the rule may decrease access to care for a large number of people who need it for life-threatening conditions like cancer. If you are on one of these medications, reach out to your healthcare provider to make sure you can get the care you need.