Will Lower Drug Price Negotiations Impact MSAs?
by B. Smith
In a press release issued this month, CMS noted that the Biden-Harris Administration reached an agreement for lowering pricing on 10 select medications. This new pricing will go into effect for people with Part D prescription drug coverage on January 1, 2026.
This represents the first time Medicare has negotiated directly with drug companies to reduce medication pricing. The prescriptions include the most frequently dispensed, costliest drugs covered by Medicare and treat conditions such as heart disease, diabetes, and cancer. Medicare beneficiaries with Part D prescription drug coverage are estimated to save 1.5 billion in out-of-pocket costs in 2026. CMS noted that if the new prices were in effect last year, Medicare would have saved an estimated 6 billion dollars. As required by law, Medicare prescription drug plans, including Part D plans and Medicare Advantage prescription drug plans, must include these medications in their formularies.
Whether these types of negotiated drug prices will have an impact on Medicare Set Asides (MSAs) is yet to be seen, but what is clear is the need for fair and accurate pricing of medications for MSAs is very much needed. Currently, CMS utilizes the Average Wholesale Price (AWP) when allocating prescription drug costs in the MSA. The use of AWP has come under much scrutiny when pricing MSAs, as it is not government regulated and is based on a number provided by the manufacturer, or published sources which can increase with markups. It may also differ greatly from what the average consumer actually pays for the medication and does not represent a true average price.
The impact of using AWP in an MSA can be, in some cases, detrimental and prevent a claim from settling when more realistic pricing is available. With national attention on lowering drug prices for Medicare beneficiaries, that same focus should also be considered when discussing the prescription drug allocation methodology CMS utilizes for voluntarily submitted MSAs.
With the pricing of medications often inflated, the importance of taking mitigation efforts to exclude non-work-related medications cannot be underrated. If not specifically addressed in the records, payment screens, and pharmacy histories, CMS will sometimes include medications due to their mere mention in the records. That is why it is important to identify potential issues and pitfalls prior to submission and to mitigate and resolve these risks. Which is why a robust and aggressive MSA program, with a partner that understands these red flags, is invaluable.
Rethinking medication pricing options is warranted given the backdrop of AWP pricing and will hopefully gain more momentum as it is on the forefront of the national agenda. No matter what pricing is used for prescription medications, mitigating prescription drug exposure should always be part of an MSA analysis now and in the future.
If you have any questions about drug pricing used in MSAs, or would like information about our MSA programs and robust mitigation solutions including traditional submitted MSAs, non-submit MSAs, and Certified MSAs, please contact the Settlement Consulting team at [email protected].