Hospitals push CMS to pause ‘most favored nation’ drug-pricing rule

Hospitals want CMS to pull the plug on its contentious “most favored nation” drug-pricing rule, a Trump-era demonstration that would tie Medicare outpatient drug pay to drug prices in other wealthy countries.

Providers argued the policy is illegal and wouldn’t lower drug prices or patients’ out-of-pocket costs in comments on the interim final rule due Tuesday. The American Hospital Association said it would “harm patients’ access to critical, lifesaving drugs” and create more financial problems for hospitals because “the rule places the entire onus of reducing drug prices on hospitals, rather than on drug companies or on Medicare.” Experts have said the Trump administration’s last-minute plan depends on providers negotiating drugmakers’ prices down to meet reduced payment levels.

CMS should “withdraw it immediately and replace it with a serious effort at drug pricing reform,” AHA wrote.

The rule would create the CMS Innovation Center‘s first nationwide, mandatory experiment, marking “sea change in the way … models have been adopted and implemented,” according to AHA.

Hospitals suggested CMS doesn’t have the power to carry out such a large experiment, saying the model “is not a test at all” and amounts to “the adoption of a nationwide policy for the highest expenditure drugs,” according to the Federation of American Hospitals. FAH noted that the 50 drugs included in the model make up about 80% of Medicare spending for Part B drugs.

“There is no control group that will be unaffected by the model’s impact in order to make any conclusion as to whether the intervention was successful as would occur in a conventional demonstration model,” the letter said.

According to CMS, the model would save taxpayers and beneficiaries more than $85 billion over seven years, mostly due to lower utilization. Nearly 20% of people covered by Medicare would lose access to treatment by the end of the model’s second year.

“Savings to the Medicare program should not be on the backs of beneficiaries, many of whom live on fixed incomes and already struggle with access to care. Further, this rule would codify a system of health inequities. Beneficiaries with sufficient personal resources to pay for drugs will continue to have access, while other beneficiaries will not,” the Association of American Medical Colleges wrote.

AAMC blamed other CMS policy changes for increased outpatient spending on separately payable drugs, saying that changes to the inpatient-only list and 2-midnight requirements have driven “a shift from the inpatient to outpatient setting.”

“Hospital outpatient departments and off-campus provider-based departments (PBDs) are seeing a spike in referrals of patients requiring treatment for advanced stages of disease,” the group said.

AARP didn’t comment on the rule, but conservative advocacy groups like Americans for Tax Reform aligned themselves with drugmakers, taking aim at the plan for relying on price controls to lower drug spending. ATR argued the plan would reduce access to new cures, limit pharmaceutical innovation and employment, and “move America one step closer to a government-run healthcare system.”

Groups representing drugmakers, including the Pharmaceutical Research and Manufacturers Association—PhRMA—did not comment on the rule. Drugmakers successfully sued to block the model from taking effect on Jan. 1. The Biden administration is unlikely to move forward with the plan following a memo last week from White House Chief of Staff Ron Klain directing agencies to freeze new regulations that haven’t taken effect.

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