2023 Medicare Advantage and Part D Final Rule on Pharmacy Price Concessions

Mike Kolodij, PharmD
May 10, 2022

The Centers for Medicare and Medicaid (CMS) published on May 9, 2022, the highly anticipated Medicare Advantage and Part D Final Rule CMS-4192-F. The intention of the finalized policies is to provide greater transparency, lower out-of-pocket Part D prescription drug costs, and improve the enrollee’s experience. One of the major provisions we have been waiting for is the confirmation to apply pharmacy price concessions at the point of sale (POS).

Beginning January 1, 2024, CMS will require Part D plan sponsors to apply all pharmacy price concessions from network pharmacies to the negotiated price at the POS. “Negotiated price” will be redefined as “the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor’s intermediary.”

CMS also defined “price concession” to include any form of discount, direct or indirect subsidy, or rebate received by the Part D sponsor or its intermediary contracting organization from any source to decrease the costs incurred under the Part D plan by the Part D sponsor. These changes will impact premiums and reduce beneficiary out-of-pocket costs for those with high drug costs.

CMS estimates that applying pharmacy price concessions in the negotiated price will reduce total beneficiary costs by $26.5 billion between 2024 and 2032 (approximately 2 percent).



Our Take
The final rule comes when Part D plan sponsors are finalizing their 2023 bids. An audible sigh of relief can be heard from all stakeholders that the administration delayed the effective date of the new provisions to January 1, 2024. However, it is not too early to start discussions with your internal actuaries, actuarial consultants, and Pharmacy Benefit Manager (PBM) on the implications and operations of the new provisions, as there is much to unpack.



Recommended action items for 2023:

  • Assess formulary and network strategies available to optimize financial performance
  • Begin product build for 2024, including evaluation of benefit designs to offset premium increases due to remuneration loss
  • Conduct a market check to ensure that your PBM agreement discount, dispensing fee, and rebate guarantees are market competitive
  • Ensure PBM operational readiness of all impacted areas, including reporting and prescription drug event (PDE) submissions
  • Implement programming that meaningfully engages retail pharmacy network providers on Stars metrics

The finalization of the price concession rule is met with disappointment by many Part D plan sponsors. Some beneficiaries (high medication utilizers) will benefit more from the change than others. Only time will tell if the new provisions meet the administration’s intent and expectations by requiring plans to design more efficient plan offerings and improved transparency.

You can access the final rule here.