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Trump administration moves to give Medicare drug plans more control over their offerings

The Trump administration moved Wednesday to give Medicare drug plans more choices in the products they can offer patients, in a bid to boost their buying power and lower drug prices.

The Centers for Medicare and Medicaid Services announced that, starting in 2020, Medicare prescription drug plans can take advantage of a tool, called an indication-based formulary, that expands the choices of products they can cover, allowing plans to opt for cheaper drugs in certain cases. The announcement Wednesday is the latest part of the Trump administration’s blueprint aimed at lowering prescription drug costs that have spiraled upward in recent years.

The goal behind the announcement Wednesday is to make Medicare more like the private sector in terms of drug negotiation.

“This is a significant step in modernizing the successful Medicare Part D program by giving plans the tools that serve patients well in the private sector,” said Health and Human Services Secretary Alex Azar, a former pharmaceutical CEO.

The tool applies to Medicare Part D, the program through which private plans cover prescription drugs that seniors buy at pharmacies. Currently there are restrictions on which drugs can be covered on a Part D plan’s formulary, which is the list of prescription drugs that a plan will cover.

“Currently, if a Part D plan includes a particular drug on its formulary, the plan must cover that drug for every [Food and Drug Administration]-approved indication, or patient condition, even if the plan would otherwise instead cover a different drug for a particular indication,” CMS said in a press release.

This requirement can discourage plans from including more drugs on their formularies and also limits “their power to negotiate discounts,” the agency argues.

Accordingly, starting in 2020, Part D plans will be able to use an indication-based formulary, which will let them tailor their formularies to include different drugs for different clinical indications. The tool is already used for private sector plans, CMS said.

This is the latest effort to bring private sector negotiating tools into Medicare.

Earlier this month, CMS allowed plans on Medicare Advantage, a program that lets seniors use their Medicare benefits to buy a private plan, to implement a cost-saving tool called step therapy. The method involves giving a patient a cost-effective treatment first and then moving them on to a pricier treatment if it doesn’t work.

That policy has received severe pushback from some medical groups, most notably the American Cancer Society’s advocacy arm, the Cancer Action Network. The group argues that step therapy could pose an obstacle to cancer patients getting the therapy they greatly need.