U.S. to boost drug price negotiation in Medicare Advantage health plans

(Reuters) - The Trump administration said on Tuesday it would give Medicare Advantage health plans for the elderly new tools to negotiate for lower prescription drug prices.

FILE PHOTO: A customer waits at the counter of a CVS Pharmacy store in Pasadena, U.S., May 2, 2016. REUTERS/Mario Anzuoni/File Photo

The Centers for Medicare and Medicaid Services (CMS) said Medicare Advantage plans will be allowed to require that patients first try certain lower-cost drugs before moving to a more expensive alternative if the first treatment is not effective.

Medicare Advantage plans are administered by private health insurers, such as Aetna Inc AET.N and Humana Inc HUM.N, and cover medical benefits for some 20 million seniors.

Until now, such requirements could not be made on drugs covered by Medicare Part B, which are administered in a hospital or doctor’s office.

The changes also affect Medicare Part D drugs that patients get at the pharmacy. The Medicare Advantage plans would be allowed to require patients try alternatives covered within Part D before moving on to physician administered drugs, that are typically much more expensive.

In 2017, Medicare Advantage plans spent $11.9 billion on Medicare Part B drugs. These types of changes in the private market have generally resulted in savings of about 15 percent to 20 percent, according to the Department of Health and Human Services.

More than half of the savings will be required to be passed on to patients, CMS said.

U.S. President Donald Trump has made lowering prescription drug costs for U.S. consumers a top priority. He announced a blueprint for lower healthcare costs in May and his administration has been announcing new initiatives this summer.

The changes announced on Tuesday can take effect as early as 2019.

Medicare Advantage plans that choose to implement the so-called step therapy will be required to disclose the change to patients. They would be allowed to switch to another Medicare Advantage plan or to fee-for-service by March 31.

Reporting by Michael Erman and Michele Gershberg; editing by James Dalgleish and Bill Berkrot