Insight

Most Favored Nation Drug Pricing Model final rule

On November 20, 2020, the Centers for Medicare and Medicaid Services announced the Most Favored Nation Drug Pricing Model

Larry Kocot

Larry Kocot

Principal, Advisory, KPMG LLP

+1 202-533-3674

On November 20, 2020, the Centers for Medicare and Medicaid Services (CMS) announced the Most Favored Nation (MFN) Drug Pricing Model (“the Model”) through the Center for Medicare and Medicaid Innovation (CMMI) and issued a corresponding interim final rule (“IFR”).

Beginning on January 1, 2021, the 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,” while “protect[ing] current beneficiary access to Medicare Part B drugs, mak[ing] them more affordable, and address[ing] the disparity of drug costs between the U.S. and other countries.”

The Model builds upon an International Pricing Index (IPI) Model Advanced Notice of Proposed Rulemaking (ANPRM) released in October 2018 to test the impacts of “increasing competition for private-sector vendors to negotiate drug prices and aligning Medicare payments for Part B drugs with prices that are paid in foreign countries.” The Model has changed in several ways from the IPI Model, most notably (1) eliminating the vendor approach and reimbursing the provider directly for Model drugs; (2) making it a mandatory, nationwide model for nearly all providers; (3) setting the target price as the lowest price available in any of the included comparison countries, rather than a 30% savings off of a target based on all comparison countries; and, (4) acknowledging that Part B drug utilization may decline as much as 19% over time as access to Model drugs may become more limited.

The Model is set to launch less than 3 weeks before the end of the Trump Presidency and appears to be an effort by the Administration to secure a “win” on tackling prescription drug prices before leaving office. However, industry groups have already sued to block the rule, which could delay or permanently derail implementation.


 

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