Opening the Gate on Protected Classes: How CMS’ Proposed Rule May Unleash a Wave of Value-Based Decision Making

By Xcenda |

As the war on drug prices wages on, the Centers for Medicare & Medicaid Services (CMS) continues to explore innovative ways to afford Part D plan sponsors the flexibility to more effectively negotiate with manufacturers on their behalf. In contrast, European Health Technology Assessment (HTA) agencies have long utilized value assessment to more tightly restrict coverage policies and maintain lower drug prices. This article examines value-based formulary decision making by managed care and its impact on patient access.


Opening the Gate on Protected Classes: How CMS’ Proposed Rule May Unleash a Wave of Value-Based Decision Making

By Anuja Kanaskar, PharmD, MS; Tom Walters, PharmD, MBA, MS; Minh Luu, MBBS; Duncan Brown, PhD; Ken O’Day, PhD, MPA; and Kristen Migliaccio-Walle, BS
As the war on drug prices wages on, the Centers for Medicare & Medicaid Services (CMS) continues to explore innovative ways to afford Part D plan sponsors the flexibility to more effectively negotiate with manufacturers on their behalf. In contrast, European Health Technology Assessment (HTA) agencies have long utilized value assessment to more tightly restrict coverage policies and maintain lower drug prices. By empowering managed care organizations to make value-based formulary decisions, it may be that a new, more competitive marketplace will help drive utilization toward more cost-effective treatment options and ultimately lower drug costs; however, questions remain about the impact on access.


CMS Protected Classes

CMS identifies 6 protected classes in Medicare Part D to ensure that beneficiaries have access to prescription drugs without encountering barriers. Plans are required to cover “all or substantially all” medications in CMS’ 6 protected classes: anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants. The protected classes were designed to protect beneficiary access to treatments in order to minimize patient risks and complications that could arise due to interruption of therapy when transitioning from commercial insurance to Part D. 

Although the original aim of CMS’ 6 protected classes policy was to ensure availability of drugs and encourage enrollment in the Part D benefit, CMS found the protected classes policy difficult to withdraw once it was implemented, and it has become known as a necessary “beneficiary protection.”
While the rule was initially well intended, there have been unintended consequences. The current protected-class rule permanently excludes approximately 14% of dispensed Medicare Part D drugs (20% of total costs) from any formulary competition in Medicare Part D. As a consequence, patients and the federal government are spending more on the drugs in the 6 protected classes compared to other Part D drugs in non-protected classes, and CMS argues that the current rule “allows the pharmaceutical industry to command high prices on protected-class drugs in Part D, without patients getting a good deal.” Evidence of lower rebates in CMS’ 6 protected classes compared to other Part D drugs over the last 10 years has raised concerns regarding the possibility of undermining market incentives for product innovation and development by potentially promoting proliferation of product variants at the expense of innovation.

What’s Happening in Non-Protected Classes?

In non-protected classes, it’s been well documented that health plans, including state Medicaid programs, are increasingly considering determinants of value in coverage and/or management decisions for certain high-cost drugs. Value assessment frameworks (VAFs), such as the Institute for Clinical and Economic Review’s (ICER) evidence reports, are starting to be utilized by payers in the US as a source of this information. VAFs are intended to provide a more objective and transparent way to evaluate and inform the clinical, economic, and humanistic impact of 2 or more competing interventions that may or may not have head-to-head clinical trial evidence. However, historically, adoption of value-based decision making for the protected classes has not been relevant, given that the restricted nature of the policy did not require any coverage decisions to be made.


Proposed Rule
In November 2018, CMS released a proposed rule for Medicare Advantage and Part D drug pricing in 2020 that would create 3 exceptions to the protected classes. The key components of the proposed rule are summarized in Figure 1. Ostensibly, the new rule attempts to achieve balance between stimulating competition among protected-class drugs while maintaining the policy’s original intent of ensuring patient access.


Figure 1. Summary of 3 Exceptions in the New Proposed Rule


The potential pros and cons of the new rule are summarized in Table 1. The proposed new rule is intended to provide Part D plans with increased flexibility to utilize value-based management and negotiating leverage for formularies regarding CMS’ 6 protected classes. Part D sponsors would be able to exclude certain drugs that are not cost-effective or are taking excessive price increases, resulting in reduced costs overall to beneficiaries and CMS. Indeed, under the proposed rule, CMS estimates savings of $141 million for Medicare and $51 million for Part D enrollees beginning in 2020 and reaching $232 million for Medicare and $88 million for Part D enrollees in 2029. 


Concerns regarding the proposed rule center on the potential disruption or prevention of access to needed medications for vulnerable Medicare beneficiaries. For example, patients with HIV/AIDS could be negatively affected, as prior authorizations may make it more difficult for patients to get their drugs in a timely manner, and step therapy may force patients to try drugs that are not appropriate or effective for their specific type of HIV. Additionally, such restrictions may interfere with provider choice regarding what is considered the best course of treatment. The cost savings projected by CMS are disputed by the Center for Medicare Advocacy; it cites analyses indicating that costs of drugs in CMS’ 6 protected classes are increasing at the same rate as costs of all Part D drugs. In combination with the barriers to access, these represent the main points of opposition to the proposed rule.
Table 1. Pros and Cons of CMS Proposed Rule on Reducing Regulations of the 6 Protected Drug Classes


HTA Coverage Differences Within Protected Drug Classes in the US

HTA bodies in the EU are not bound by the protected class legislation of the US and, therefore, have more freedom to make value-based coverage decisions within these classes, utilizing each country’s regular HTA pathway. Table 2 illustrates how certain drug agents, which are part of the 6 protected classes in the US, were assessed (ie, favorably or unfavorably) by respective HTA agencies. These examples demonstrate how HTAs that allow for value-based decision making can determine that certain medications within CMS’ 6 protected classes may be considered unfavorable in terms of overall value.  
Table 2. HTA Decisions for Agents Falling Under the 6 Protected Drug Classes in the US


In some countries, there are separate drug appraisal pathways for certain drug classes, including oncology treatments and treatments for rare/orphan diseases. For example, evidence submissions from the sponsors of new oncology drugs to the United Kingdom (UK) National Institute for Health and Care Excellence (NICE) are critiqued by Evidence Review Groups (ERGs), and subsequent recommendations for use (ie, favorable or unfavorable) are made by 1 of the 4 NICE appraisal committees. If there are uncertainties around the effectiveness of new oncology treatments, the National Health Service (NHS) England and NICE may work in partnership with manufacturers to request further evidence. In such cases, the UK’s Cancer Drugs Fund (CDF) can serve as an interim source of funding for oncology agents, during which patients have access to treatment, while additional evidence to aid NICE in its final decision is collected.
Similarly, in Canada, the Canadian Agency for Drugs and Technologies in Health (CADTH) pan-Canadian Oncology Drug Review (pCODR) is an evidence-based review process of cancer drugs that is designed to evaluate clinical and cost-effectiveness information in order to guide funding recommendations. Reimbursement recommendations for oncology treatments are made by the CADTH pCODR Expert Review Committee (pERC), composed of medical oncologists, physicians, pharmacists, economists, an ethicist, and patient members. These specialized pathways for oncology agents offer approaches to value-based decision making for drugs that are usually very high in cost. While the US doesn’t currently have an official, federal HTA-like entity, the same economic principles hold true for managed care organizations in the US that may use independent VAFs, such as ICER’s VAF (some organizations, like CVS, have publicly stated that they will use ICER recommendations in their formulary decision-making process). Through VAFs, managed care organizations in the US may be able to leverage stronger negotiating tactics and their value-based benefit designs to help drive down drug costs.

Implications for Value-Based Decision Making in the US

With regard to the US system, mandated coverage of all agents in a particular class has important implications in terms of drug price negotiations between manufacturers and payers. Drawing from examples of how HTA bodies in other countries have assessed agents that fall under CMS’ 6 protected classes can provide insight on alternative solutions the US can consider to determine the value of these therapies in the future. The CMS proposed rule may loosen restrictions surrounding its 6 protected classes and allow more flexibility to utilize value-based management. New opportunities exist for plans to begin leveraging ICER reviews or other VAFs to help assess product value for plan sponsors and make value-based formulary decisions. Thus, under the new proposed rule, some drugs currently in CMS’ 6 protected classes could be deemed unfavorable in terms of value.
Despite the flexibility afforded by this new policy change, payers will still need to ensure that patients are receiving high-quality care and that changes in treatment options are not negatively affecting patient access (eg, fewer options, prior authorization criteria, or step therapy). It is anticipated that managed care decision makers will continue to implement value-based formulary decision-making practices, and the increased flexibility provided by this change will allow them to leverage VAFs, such as ICER, National Comprehensive Cancer Network (NCCN®) Evidence Blocks™, or the Innovation and Value Initiative VAF, in order to more tightly manage costly drugs within these protected classes.




The article should be referenced as follows: 

Kanaskar A, Walters T, Luu M, Brown D, O'Day K, Migliaccio-Walle K. Opening the gate on protected classes: How CMS’ proposed rule may unleash a wave of value-based decision making. HTA Quarterly. Spring 2019. May 16, 2019.


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