Medicare Set-Aside Prescription Drug Changes – Some Pills Are a Little Less Bitter

4.27.2020 Blog

For those of us who have been doing Medicare Set-Asides for over a decade, CMS’ pricing of prescription drugs has been a difficult pill to swallow.  Initially, we as an industry priced prescription drugs in a variety of ways: based on actual cost; using mail-order pharmacy prices; or sometimes even using prices from other countries to simulate the eventual generic pricing of a drug which was not yet available in the United States.  In April of 2009, things changed.  CMS published a policy memo advising submitters that CMS would start independently price prescription drug costs and expenses, calculating the prices using the average wholesale price (AWP) published in Red Book.

AWP has been referred to as the “sticker price” of a drug and is generally determined based on the manufacturer’s self-report, though there are other methods used to calculate AWP.  Given this, AWP has been criticized as being inflated by around 20%.  On the other hand, some of the prices listed in AWP are far less than the cost on the open market.

AWP can also change from month-to-month for a variety of reasons, including competition for market share and medications going generic.  Lyrica’s generic option, for example, meant a significant price drop and led to an increase in WCMSA cases being submitted once the generic pricing became available through the portal.  In one of my cases, this change saved approximately one hundred thousand dollars.  Lyrica’s generic, pregabalin, also saw another large reduction in AWP in March.  The price per tablet now spans between 28 and 99 cents, depending on its strength.

In March, we also saw a substantial reduction in the AWP for Meloxicam, a popular non-steroidal anti-inflammatory (NSAID).  On February 27, 2020, Exelan Pharmaceuticals reduced its price for Meloxicam 7.5 mg and 15 mg strengths down to five cents per tablet.  This is a big jump compared to the $4.25 per pill we were used to seeing.  Obviously, the impact of this reduction adds up over a beneficiary’s 15- or 20-year life expectancy.

Similarly, but maybe not as impactful in dollars, through its “RX-to-OTC” program, the FDA just approved Voltaren (diclofenac sodium 1%) gel to be purchased over-the-counter in lieu of needing a prescription.  When it becomes available, it will be sold under the name Voltaren Arthritis Pain.  Its over-the-counter availability also means it should not be included in MSA proposals where it is being filled over-the-counter.  Note CMS will likely want to see proof that the gel is being obtained over-the-counter for a few months before removing the drug from the MSA allocation.  The cost of Voltaren was relatively low, proximally $.50 per dose, and will probably make a difference of between $1,000.00 and $5,000.00 in most MSAs.

Ultimately, these types of changes call for an audit of any Medicare Set-Aside proposal that has not yet been submitted to CMS, to see if these changes make your case any easier to settle.  Because AWP changes daily, but CMS only uploads the AWP changes once per month (usually being reflected in the portal around the third or fourth of each month), the time is right to assess whether you may want to submit cases involving Meloxicam to CMS before AWP increases in price.  We generally recommend waiting to submit Voltaren as OTC until it actually becomes available in stores.

It should be noted that a change in AWP pricing is not immediately seen in CMS’ WCMSA portal.  CMS downloads the pricing once per month, and the change is generally seen in the portal by the second of the following month.  It is imperative for allocators to price all prescriptions in Red Book at the time of submission and not just rely on the price found on the CMS portal.  When CMS has not yet reduced the AWP price on the portal, we allocate for the current Red Book price and provide a copy of the Red Book price information sheet in our submission.

Your partners at Nyhan, Bambrick, Kinzie & Lowry P.C. are always on the lookout for big price changes like this because we know they impact your settlements.  If you ever have a prescription drug allocation that makes case cost prohibitive to settle, or where you have any questions about how claim handling procedures could be used to mitigate a prescription drug component of an MSA, we stand ready to assist.  Feel free to reach out to our MSA professionals at any time.

The NBKL blog is provided for informational purposes; we are not giving legal advice or creating an attorney/client relationship by providing this information.  Before relying on any legal information of a general nature, you may consider consulting legal counsel as to your particular facts and applications of the law.