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CMS Announces New Payment Model for Medicare Prescriptions

HHS Secretary Alex Azar recently announced a drug payment model through the Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services. The payment model will lower Medicare Part B payments for certain drugs to the lowest price for similar countries.  It will save American taxpayers and beneficiaries more than $85 billion over seven years.

Starting in January, the model, known as the Most Favored Nation (MFN) Model, will test an innovative way for Medicare to pay no more for high cost, physician-administered Medicare Part B drugs than the lowest price charged in other similar countries.

This comes after the President’s recent Executive Orders to lower drug prices and improve access to life-saving medications, the MFN Model will protect current beneficiary access to Medicare Part B drugs, make them more affordable, and address the disparity of drug costs between the U.S. and other countries.

“The way we pay for some of the most costly drugs in Medicare today puts American patients last; the President’s Most Favored Nation Model will put American patients first,” said HHS Secretary Alex Azar. “By dramatically lowering prices and potentially delivering more than $28 billion in out-of-pocket savings for patients, the Most Favored Nation Model will be the most significant single action any administration has ever taken to lower American drug costs.”

“President Trump has proven time and again that he is unafraid of taking on the entrenched special interests that have stymied patient-centered reforms in Washington for generations,” said CMS Administrator Seema Verma. “The current system creates incentives for drug manufacturers to price Medicare Part B drugs as high as they can in the U.S. system because the program pays doctors more when they prescribe more expensive drugs, even when a lower cost, clinically-equivalent alternative is available. The Most Favored Nation Model will lead to lower drug prices for seniors.”

The rule tackles a number of issues identified in the American Patients First drug pricing blueprint, released by President Trump in May 2018 and developed by HHS under Secretary Azar’s leadership, including high out-of-pocket costs, foreign freeriding, and the need for more biosimilar competition.

The model also includes protections for beneficiaries to ensure they will see savings compared to what they would pay if the model were not available. Additionally, the model includes financial hardship protections for certain MFN participants (physicians, hospitals, and other providers) whose revenue is significantly affected by the model.