NPC Comments on Most Favored Nation (MFN) Model [CMS-5528-IFC]

January 26, 2021

Acting Administrator Elizabeth Richter
Centers for Medicare & Medicaid Services
US Department of Health and Human Services
200 Independence Ave SW
Washington, DC 20201

Submitted via https://www.regulations.gov 

RE: Most Favored Nation (MFN) Model [CMS-5528-IFC]

Dear Acting Administrator Richter, 

Thank you for the opportunity to comment on the interim final rule with comment period (IFC), "Most Favored Nation (MFN) Model," which implements a new payment model for certain Medicare Part B drugs and biopharmaceuticals.  

The National Pharmaceutical Council (NPC) is a health policy research organization dedicated to the advancement of good evidence and science and to fostering an environment in the United States (US) that supports sustainable medical innovation. NPC is supported by the major US research-based biopharmaceutical companies. We focus on research development, information dissemination, education and communication of the critical issues of evidence, innovation and the value of medicines for patients. Our research helps inform important health care policy debates and supports the achievement of the best patient outcomes in the most efficient way possible.

NPC supports opportunities to optimize health care spending so that patients receive the right care while providing appropriate incentives to sustain next-generation innovation, address health system efficiencies and improve patient well-being. Now, more than ever, we are witnessing just how transformative biomedical innovation can be for society.  

NPC strongly believes that the Most Favored Nation (MFN) Model is not an appropriate demonstration due to the severe negative impacts it will cause, particularly to patient access and future innovation. Therefore, we urge CMS to withdraw this IFC. 

Our comments focus on:

• Patient access will be negatively impacted by the MFN Model;
• The MFN Model will stifle future innovation, further compounding the negative impact on patient outcomes;
• Comparison to other countries inappropriately imports values, preferences, access environments, and overall health care approaches different from the US;
• Policies to address health spending should not conflict with other policies to speed innovation and improve patient outcomes.

Patient Access Will Be Negatively Impacted by the MFN Model 

The MFN Model will have broad impacts on patients and other payers beyond Medicare Part B. As conceded in the interim final rule itself, savings from implementing the MFN Model are "attributable to beneficiaries not accessing their drugs through the Medicare benefit, along with the associated lost utilization." The CMS Office of the Actuary predicts that close to one in five fee-for-service beneficiaries who benefit from therapies among the proposed MFN drugs will not have access to their medicines for the last five years of the model. This means that, by design, the MFN Model will negatively affect beneficiaries in the near-term, reducing access for fee-for-service beneficiaries and forcing them to travel further for MFN therapies or forgo treatment altogether. 

The drugs in the MFN Model effectively treat a variety of complex medical conditions, helping patients achieve positive clinical outcomes and increase their quality of life. By implementing this Model, CMS will facilitate beneficiaries losing access to vital medicines, meaning the conditions they have been diagnosed with will go untreated despite the availability of viable treatment options while achieving few benefits for patients. Whether patients lose access to therapies they are taking or cannot start on a new treatment following a diagnosis, the result is the same: patients do not benefit.

Beyond the negative impacts outlined by the CMS Office of the Actuary, few Medicare beneficiaries may expect to see reductions in out-of-pocket costs. As found recently by Avalere, 94% of all Medicare fee-for-service beneficiaries have supplemental coverage that bridges the cost-sharing requirements for Medicare Part B medications. The benefits of reduced out-of-pocket costs are projected to assist less than 1% of all beneficiaries.[i]

Patient Access for Non-Medicare Beneficiaries Will Be Also Be Impacted

In the IFC, CMS requested feedback on the potential impacts and evidence on how this rule could affect other payers, patients, and drug manufacturers. The MFN Model and other programs are unlikely to improve access for patients who receive insurance through employer-sponsored health plans or state health insurance exchange. A recent NPC survey of 35 health plans, integrated delivery networks and pharmacy benefit managers found that a 15% reduction in overall drug spending would not expand coverage of branded therapies as long as rebates persist. Only 23% anticipated these savings would be passed along to consumers via lower copay amounts or lower coinsurance amounts (11%). These savings would only be attributed to medications with specific price reductions.[ii]

Policies to address health spending should not decrease patient access and have limited or minimal impacts on measures that matter to patients. We encourage CMS to rescind the MFN Model and adopt coverage and payment policies that promote access to vital, life-saving medicines. 

The Most Favored Nation Model Will Stifle Future Innovation, Compounding the Negative Impact on Patient Outcomes

Innovation, especially in the biopharmaceutical market, has consistently led to better outcomes for patients. Due to innovation's vital role, NPC is concerned about the MFN Model and the long-term impact on innovation. Public policies, including those for coverage and payment, should not stifle or limit innovation, whether through design or unintended consequences. The MFN Model has the potential to do just that — stifle new and innovative technologies developed by the biopharmaceutical industry in years to come and ultimately limit patient access to medicines and future patient outcomes. 

Innovation Can Improve Outcomes; Less Innovation Means Fewer Improvements in Patient Well-Being

Pharmaceutical products have been an important tool in achieving positive health outcomes for patients with a variety of conditions for decades. For example, NPC research found investments made 20 years ago to combat the worst diseases of this period continue to pay-off. Six of the top seven causes of death and disability in 1995 have seen significant improvements in patient outcomes associated with these investments.[iii] Findings from a physician survey indicated that pharmaceutical and biopharmaceutical products were viewed as accounting for the greatest impact on mortality and morbidity across these top conditions.[iv] Pharmaceuticals in that period and beyond represent significant advances in treatment for diseases and conditions such as cancer, cerebrovascular diseases, HIV, and others. 

These findings were reinforced by other researchers who quantified how public health, pharmaceutical products and other medical care contributed to improved life expectancy between 1990 and 2015. The research found that 35 percent of the increase in life expectancy was attributable to pharmaceuticals.[v] In comparison, other medical care accounted for only 13 percent. 

Beyond life expectancy, other NPC research found that novel specialty therapies slow disease progression and improve patient quality of life for conditions with high specialty pharmaceutical spending and use of Medicare Part B products for rheumatoid arthritis, multiple sclerosis, and breast cancer.[vi]

The ongoing COVID-19 pandemic underscores the need to adopt policies that promote innovation as researchers across the globe work to develop therapeutics and vaccines to combat this virus. In totality, these research findings demonstrate how vital pharmaceutical products are and the need for policies that recognize their benefits and encourage, not dampen, future investment in innovations that will lead to improved patient outcomes in the decades to come.

Innovation is Linked to Market Size and Expected Revenues

There is substantial empirical evidence indicating that changes in expected revenues have far-reaching impacts on innovation. A literature review conducted by the Analysis Group and the National Pharmaceutical Council found that larger potential market size, broader patient populations, expanded market exclusivity, and decreased research and development costs or regulatory review timelines are associated with increased product innovation.[vii] In contrast, policies that constrain prices negatively affect innovation. 

Increases in market size and expected revenues have a positive impact on innovation. The biopharmaceutical business model is sustained by investors and their perceived view of risk vis-à-vis return on investment or expected revenues. Acemoglu and Linn assessed innovation in the US over a 30-year period and found that a one percent increase in the US market size was associated with a four to six percent increase in non-generic medications and new molecular entities,[viii] meaning potential new innovations that can improve patient outcomes. Blume-Kohout et al. assessed the number of drugs in various phases of clinical development before and after Medicare Part D benefit implementation — which determined that an expansion of the pharmaceutical market occurred. Although innovation metrics increased for all medications, these metrics were more significant for drugs with a higher potential Medicare market share (e.g., drugs for Alzheimer's disease) than those with a lower Medicare market share (e.g., contraceptive medications).[ix] The relationship between innovation and market size was further studied using data from 14 countries over 11 years. The number of new drugs increased (or decreased) as the market size expanded (or contracted), although the results varied by therapeutic class. Treatments for the nervous system, sensory organs and antineoplastic and immunomodulating agents — many of which represent Medicare Part B spending — were most sensitive to changes in market size.[x]

Restrictive public policies have a negative impact on innovation and patient access. As noted in the Congressional Budget Office's (CBO) scoring of HR 3, the Lower Drug Costs Now Act of 2019, a 19% reduction in global revenues for biopharmaceutical manufacturers is predicted to result in a 10% decrease in new drugs introduced to the market.[xi] Danzon et al. found new drugs were less likely to launch in countries with strict reference pricing policies compared to countries with fewer reference pricing policies.[xii] Similarly, an analysis of pharmaceutical entries across 25 countries found those countries with smaller expected market size had longer delays in pharmaceutical drug access and availability.[xiii]

This empirical literature comparing innovation after market changes is reinforced by other studies. An NPC funded study used a prospective micro-simulation approach to model how price controls in the US would affect early-stage product development decisions in the pharmaceutical industry. Our simulations found that cutting pharmaceutical prices would have a significant impact on the incentives for private firms to invest in research and development. The number of compounds moving from the laboratory into human trials would decrease by up to 50% to 60%. Because of the uncertainties, fewer compounds moving into clinical trials translates into fewer new products — the effects of which wouldn't be felt for several decades because of the long development cycle.[xiv] As argued by Rosenblatt and Termeer, inventing a new drug is the longest, most expensive, most regulated, and most risky undertaking of any product-development process in any industry. Nine out of 10 drug candidates that enter clinical trials fail, and even then, only 2 out of 10 recover the cost of capital.[xv] 

In totality, because of the spillover effects of R&D, less activity today reduces the possibilities for new opportunities. Efforts that reduce incentives and capital for research and development would have multiplier effects on future innovation. As other researchers have noted, the societal costs associated with policies that decrease the incentives for investment in research and development and competition may outweigh the potential costs associated with too much innovation.[xvi][xvii] Any policy design to impact health should care spending should evaluate the changes not only on health spending but also the population health and other outcomes impacts important to our nation.

Innovation Can Be a Good Value or Even Cost-Saving

Innovation is a key component in improving patient outcomes. Additional spending to treat the most critical causes of death and disability over the past 20 years has been both a source of value creation and even health savings.[xviii] The increased prevalence of chronic conditions and longer beneficiary lifespan, coupled with inflation, account for the majority of growth in health care costs. Spending wisely — which may require upfront investments — can reduce per-patient costs for certain diseases. Using high-value pharmaceuticals may allow for better and more efficient care in less-costly settings. 

Comparison to Other Countries Inappropriately Imports Values, Preferences, Access Environments, and Health Care Approaches Vastly Different from the United States 

The MFN Model uses international prices to determine reimbursement for drugs covered under Medicare Part B, inappropriately importing other countries' preferences, values, access environments, and health system approaches. Value encompasses the balance of benefits and costs experienced by patients and society broadly over time. However, societal views and norms vary greatly between other countries and the US. 

First, the US differs in important ways from other high-income countries. It is very appealing to believe that a few identifiable factors (e.g., utilization or price for a single service) drive health spending. However, more nuanced relationships must be considered. Multiple analyses exemplify these relationships when comparing cross-country health statistics.[xix],[xx]  The US population includes a greater proportion of persons living below the poverty line, is more obese and has worse maternal and infant mortality than other high-income countries. The availability and use of technologies are more generous in the US. For example, there are more magnetic resonance imaging, computed tomography, and mammography machines per capita in the US than in other high-income countries. Surgical procedures such as total knee replacements, cesarean deliveries, and cataract surgeries occur with greater frequency in the US. 

Second, prices for drugs and all health care services, including hospitals, diagnostics and other health care services, vary significantly between the European Union (EU) and the US. The US pays health care workers more at all levels (e.g., general practice providers, specialty providers and nursing). In the US, administrative costs for health care are nearly three times the cost in other countries.[xxi] Assuming other health care systems will have similar prices is a fallacy. 

Third, many countries included in the MFN Model appear to prioritize cost savings over patient access to innovative medications that may save or improve their quality of life. Access to care across countries varies greatly. A recent study by the Organisation for Economic Co-operation and Development (OECD) compared coverage for 109 oncology products and indications. The study found Medicare covers the majority (91%) of all products and indications in contrast to Greece and France, which cover only (78% and 76%, respectively). Other countries in the EU reimburse 80-88% of these products. Variation in product access is most pronounced among newer products or indications.[xxii] It is also important to note that medication coverage may not equate to comparable coverage for individual patients. In each country, access may vary based on the recommended place in therapy, limits on combination product use, patient characteristic requirements or population restrictions. 

Fourth, the U.S. has sustained access to medications due to the patent protection system. Upon loss of market exclusivity, the United States, the United Kingdom and Germany had the highest number of products with multiple generics or biosimilars. Lifetime costs associated with innovation vary from country to country. 

Finally, international data sources are limited. This can create additional concerns as manufacturers frequently are not given any option for recourse if the included prices are incorrect. By using these prices, the MFN Model again imports the policies of foreign countries with different approaches to value, societal norms, health care and health delivery at the expense of patients. 

Policies to Address Health Spending Should Not Conflict With Other Policies to Speed Innovation and Improve Patient Outcomes

Health spending can be addressed without hindering other policies to speed innovation and improve patient outcomes. For example, the 21st Century Cures Act created incentives to further innovation for many products, including cell and gene therapies. These innovative products hold great promise for patients, particularly those suffering from previously untreatable conditions and orphan diseases. The MFN Model threatens the development and patient access to such therapies. 

Over the past decade, stakeholders have taken strides to promote value in coverage and payment policies instead of focusing merely on the quantity of services. CMS has been part of these efforts, adopting policies and regulations to further value-based purchasing arrangements. NPC believes that value-based solutions present a viable path to address health care spending and short-term affordability issues for some of the highest budget impact treatments.[xxiii]

In addition to efforts to promote the use of value, many groups have focused on reducing low-value care. The United States spends as much as $340 Billion annually on low-value or unnecessary care.[xxiv] Health care spending policies should be targeted to identify and discourage the use of low-value treatments.[xxv] Even a marginal (e.g., one to three%) impact on low-value care would exceed the total MFN Model savings over 7-years as estimated by the CMS Office of the Actuary or by the Office of the Assistant Secretary for Planning and Evaluation.

A model like the Most Favored Nation Model contradicts the work being done to promote the incorporation of value into the health care system and reduce waste and unnecessary care. New policies should not dampen these efforts but instead develop the unique financing solutions needed to ensure patient access to new and innovative treatment options. 

In the MFN Model IFC, CMS sought comment on cell and gene therapies in relation to the MFN Model. First and most important, while NPC believes that the MFN Model should be withdrawn, we further note that many cell and gene therapies are not readily available to patients outside the US. Therefore, comparisons are not possible. Second, current payment approaches — nor the MFN Model — do not account for the unique challenges posed by durable and potentially curative therapies with high up-front costs, including cell and gene therapies. Third, cell and gene therapies often treat small populations, meaning harmful coverage and reimbursement policies can easily prevent patients from having access to these transformative treatment options. Instead of deploying a race to the lowest price, unique financing solutions need to be developed to ensure patient access and health system sustainability. Payment mechanisms should be tailored to each therapy's specific context.[xxvi] CMS should adopt policies that use value-based arrangements for these products and the use of these types of treatments beyond the current inpatient use. However, policies like the MFN Model will undercut these efforts, relegating these products to the potentially more expensive inpatient setting and narrowing the patients who will see positive clinical outcomes from these therapies.  

Finally, the MFN Model focuses solely on a narrow subset of prescription drugs without attention to broader cost and value considerations. Rather than focusing on one sector of the health care system, it is important to evaluate cost trends and the value of treatments and services across the health care continuum. Policies should not disincentivize biopharmaceutical innovation while allowing the utilization of high-cost, low-value care across the health care system to continue. Market-based approaches to managing health care spending and prescription drug costs such as indication-based pricing and value-based arrangements should be encouraged.[xxvii] 

Conclusion

The MFN Model will have far-reaching, devastating effects on patient access and innovation. In the immediate years, diminished patient access will mean patients may suffer worse outcomes. In the long term, less innovation will mean fewer improvements in patient well-being and setting the U.S. back decades in clinical advancements. New payment model proposals should be carefully evaluated to assess intended and unintended consequences that may arise in the short and long term. The adoption of new policies should not harm patients. 

Rather than implement the MFN model, CMS should focus on policies that promote high-quality care and preserve patient access to needed, innovative medicines. We urge CMS to withdraw the MFN Model in order to preserve patient access and promote innovation that will lead to patient improvements in health outcomes for years to come.

Sincerely,

Jennifer S. Graff, PharmD
Vice President, Policy Research
National Pharmaceutical Council 
 

References:

[i] Avalere. Most Favored Nation Rule’s Impact on Medicare Beneficiaries OOP Costs. December 3, 2020. Available at: https://avalere.com/insights/most-favored-nation-rules-impact-on-medicare-beneficiaries-oop-costs.

[ii] Xcenda Managed Care Network Survey. Impact of Government Price Regulation on Formulary Management. Quantitative survey fielded December 8, 2020 through January 10, 2021. Information on file and upon request to [email protected].

[iii] Wamble D, Ciarametaro M, Houghton K, Ajmera M, and Dubois R. What’s Been the Bang for the Buck? Cost-Effectiveness of Health Care Spending Across Selected Conditions in the US. Health Affairs. 2019; 38(1): 68-75.

[iv] Wamble D, Ciarametaro M, and Dubois R. The Effect of Medical Technology Innovations on Patient Outcomes, 1990-2015: Results of a Physician Survey. Journal of Managed Care & Specialty Pharmacy. 2019; 25(1): 66-71.

[v] Buxbaum J, Chernew M, Fendrick AM, Cutler DM. Contributions of Public Health, Pharmaceuticals, and Other Medical Care to US Life Expectancy Changes, 1990-2015. Health Affairs. 2020; 39(9): 1546-1556.

[vi] Zalesak M, Greenbaum JS, Cohen JT, Kokkotos F, Lustig A, Neumann PJ, Pritchard D, Stewart J, Dubois RW. The Value of Specialty Pharmaceuticals - A Systematic Review. American Journal of Managed Care. 2014; 20(6): 461-72.

[vii] Analysis Group and the National Pharmaceutical Council. Targeted literature review related to the economics of biopharmaceutical innovation was conducted in 2020. The Congressional Budget Office analysis of HR 3 was used to identify three initial “seed” studies along with forward citations since 2015 to identify more recent relevant articles. Secondly, a supplemental keyword-driven database search was conducted using the search terms (“Drug” OR “Pharmaceutical”) AND (“Price Regulation” OR “Cost”) AND “Impact” AND “Innovation” among EconLit, Health Affairs, NBER Working Papers, and Google Scholar. Studies were limited to publication after 2000, in English and with a U.S. focus (but does not exclude multi-country studies).

[viii] Acemoglu D, Linn J. Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry. Quarterly Journal of Economics. 2004; 119(3): 1049-1090.

[ix] Blume-Kohout M and Sood N. Market Size and Innovation: Effects of Medicare Part D on Pharmaceutical Research and Development. Journal of Public Economics. 2013; 97: 327–336.

[x] Dubois P. Market Size and Pharmaceutical Innovation. RAND Journal of Economics. 2015; 46(4): 844-871

[xi] Congressional Budget Office. Effects of Drug Price Negotiation Stemming From Title 1 of H.R. 3, the Lower Drug Costs Now Act of 2019, on Spending and Revenues Related to Part D of Medicare. October 11, 2019. https://www.cbo.gov/system/files/2019-10/hr3ltr.pdf?wpisrc=nl_health202&wpmm=1.

[xii] Danzon, P and Ketcham J. Reference Pricing of Pharmaceuticals for Medicare: Evidence From Germany, the Netherlands, and New Zealand. Forum for Health Economics & Policy. 2004; 7(1): 1-54.

[xiii] Danzon P, Wang YR, Wang L. The impact of price regulation on the launch delay of new drugs—evidence from twenty‐five major markets in the 1990s. Health Economics. 2005; 14(3): 269-292.

[xiv] Abbott TA, Vernon JA. (2005). The Cost of US Pharmaceutical Price Reductions: A Financial Simulation Model of R&D Reductions. NBER Working Paper 11114. Available at: https://www.nber.org/system/files/working_papers/w11114/w11114.pdf.

[xv] National Academy of Medicine. (2013). Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Available at: https://www.nap.edu/catalog/13444/best-care-at-lower-cost-the-path-to-continuously-learning.

[xvi] Lakdawalla, D. U.S. Pharmaceutical Policy In A Global Marketplace. Health Affairs. 2009; 28(1): 138-150.

[xvii] Dranove DS, Garthwaite C, Hermosilla M. Expected Profits and The Scientific Novelty of Innovation. NBER Working Paper No. 27093, Issued in May 2020. Available at https://www.nber.org/papers/w27093.

[xviii] Wamble D, Ciarametaro M, Houghton K, Ajmera M, and Dubois R. What’s Been the Bang for the Buck? Cost-Effectiveness of Health Care Spending Across Selected Conditions in the US. Health Affairs. 2019; 38(1): 68-75.

[xix] Papanicolas I, Woskie LR, Jha AK. Health Care Spending in the United States and Other High-Income Countries. JAMA. 2018;319(10):1024–1039.

[xx] Greenwald L, Graff J, Wamble D, Dubois RW. International Health Care Spending Data: What They Can Tell Us, And What They Can’t. Health Affairs Blog. May 7, 2018. Available at https://www.healthaffairs.org/do/10.1377/hblog20180430.6731/full/.

[xxi] Papanicolas I, et al.

[xxii] OECD. Addressing Challenges in Access to Oncology Medicines. Analytic Report. (2020). Available at: https://www.oecd.org/health/health-systems/Addressing-Challenges-in-Access-to-Oncology-Medicines-Analytical-Report.pdf.

[xxiii] Comments available at https://www.npcnow.org/newsroom/commentary/npc-comments-cms-proposed-rule-medicaid-best-price-value-based-purchasing.

[xxiv] National Academy of Medicine. (2013). Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Available at: https://www.nap.edu/catalog/13444/best-care-at-lower-cost-the-path-to-continuously-learning.

[xxv] Going Below the Surface. Roadmap for Addressing Low-Value Care. (2020). Available at: https://goingbelowthesurface.org/wp-content/uploads/2020/07/gbts-roadmap-for-addressing-low-value-care-final-july2020.pdf.

[xxvi] MIT NEWDIGS. Precision Financing Solutions for Durable/Potentially Curative Therapies. January 2019. Available at: https://newdigs.mit.edu/sites/default/files/MIT%20FoCUS%20Precision%20Financing%202019F201v023.pdf.

[xxvii] NPC Comments on the International Pricing Index Model for Medicare Part B Drugs. Comments available at https://www.npcnow.org/newsroom/commentary/npc-submits-comments-international-pricing-index-model-medicare-part-b-drugs.