The Devil Might Be in the ADDED Details
I’ve talked a lot about the Inflation Reduction Act (IRA) and the fact that it granted the government the power to fix the prices on a selected number of prescription drugs. Here’s just one blog where I’ve talked about the negative impact this law will have on innovation. That impact has already begun as multiple pharmaceutical companies have delayed or stopped research due to the increased risks dictated by the IRA. One part of IRA implementation is the release of guidance where CMS details how these “negotiations” would be carried out and how the government’s oversight would be accomplished. I put quotation marks around the term negotiations because there are really no negotiations. The drug manufacturer must take the price the government dictates or lose the ability to sell their drugs in the Medicare or Medicaid programs. The details in this guidance are where the devil sets up shop. These details can and do have a huge impact on how the whole process works. Before I move on, I need to rant a little about checks and balances.
I’ve talked before about how the use of guidance in civilian agencies and the use of executive orders by presidents has increased. These tools have their place but, in the last 10 years, have increasingly been used to bypass the legislative branch, and sometimes the judicial branch, to implement impactful new programs or substantial changes to existing law. This is NOT how our government of checks and balances should work. No branch of our government should be able to dictate implementation rules without any constraints. This is why the recent release of the 136-page draft guidance for next year’s drug selection and price “negotiations” are so important . . . this guidance can have a huge impact on how the whole process will be implemented.
CMS, after allowing a short window of comments, finalized the guidance that would dictate how the whole process for the ten selected drugs would be handled, and that process is moving forward. We are waiting to see how this whole implementation plays out, and I will work to keep you up to date as it moves forward. Early last month, CMS released the draft guidance for next year’s process. The devilish details of this new guidance are what scares me. While the experts will drill down to analyze the true impact of the new guidance, there are a few things I’d like to focus on.
As you might remember, we only had a 30-day notice for when we could submit public comments on the first draft guidance. This time they increased it to 60 days (May 3 – July 2), of which half of that time has passed. Here are two parts of the draft guidance that deal with stakeholder comments:
“The comment period is open for 60 days. Comments received by July 2, 2024, will be considered during the development of final guidance. Since this draft guidance for the second cycle is being released as the first cycle of negotiations is underway, additional learnings may be incorporated into the final guidance that is set for publication later this year.”
“In the final guidance, CMS may make changes to any policies discussed in this draft guidance in response to comments received or based on the agency’s further consideration of the relevant issues.”
These two parts give us an idea of the latitude that CMS wants to maintain in its ability to introduce new things that were not part of the draft guidance. This gives them the ability to withhold the more controversial parts of the guidance or introduce items after “further consideration.” They can make changes or introduce new policies without giving the stakeholders the chance to comment.
Consider the following quote from the draft guidance:
“This draft guidance is not subject to the notice-and-comment requirements of the Administrative Procedure Act (APA) or the Medicare statute due to the requirement in sections 11001(c) and 11002(c) of the IRA to implement the Negotiation Program for 2026, 2027, and 2028 by program instruction or other forms of program guidance.”
The Administrative Procedure Act (APA) was passed into law to ensure that stakeholders had the ability to comment on proposed guidance from civilian agencies. Medicare has a statute to accomplish the same thing. This law and statute were ignored because of CMS’s ability to define the details of the IRA to suit their whims. They further indicated that they were allowing public comment just to be nice when they stated in the proposed guidance:
“To allow for public input, CMS is voluntarily soliciting comments on all sections of this draft.”
How benevolent of them to voluntarily allow comments. This just is not the way we ought to operate. I suspect that any listening sessions, if CMS voluntarily allows it, will be a one-way communication with no feedback or response, just like what happened last year.
This whole process is fraught with unintended consequences, to say nothing about the inevitable consequence of a decrease in innovation. The draft guidance shows that CMS is just beginning to realize the complexity of communicating with all of the parts of the supply chain, policing compliance, and even estimating when a generic or biosimilar will be available for a drug under consideration. These are the details that CMS will need to resolve, and they will no doubt use their unlimited power to deal with the issues in any way they please.
My last concern is with Medicare beneficiaries like you and me. When we go to the pharmacy or get our medicine delivered, will we see lower out-of-pocket costs? I am waiting to evaluate this part of the exercise. I’ll do my best to give you some idea of how these changes may benefit you.
Best, Thair