On Tuesday, the Centers for Medicare and Medicaid Services gave new authority to Medicare Advantage plans that allows those plans to negotiate lower drug prices. The policy will also allow Medicare Advantage plans to cross-manage across Part B and Part D as applicable. Publicly traded drugmakers that may be impacted by the news include Regeneron (REGN), Amgen (AMGN), Roche (RHHBY) and Johnson & Johnson (JNJ).

CMS CHANGES: The Centers for Medicare and Medicaid Services announced on Tuesday that Medicare Advantage plans will have the option in 2019 of applying step therapy for physician-administered and other Part B drugs for new patients. Part B drugs often have a competitor in Part D, but plans were not allowed to choose, according to CMS Administrator Seema Verma. Starting in 2019, MA plans that also offer a Part D benefit will be able to cross manage across B and D, the CMS said. “As a result of the agency’s action today, the Medicare Advantage plans that choose to offer this option will be able to have medicines in Part B compete on a level playing field with those in Part D,” the agency said in a statement. Commenting on the changes, Alex Azar, the Department of Health and Human Services Secretary, stated that “President Trump promised better Medicare negotiation and lower drug prices for the American people. Today, we are taking an important step in delivering on that promise. By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use.” Azar added that “As soon as next year, drug prices can start coming down for many of the 20 million seniors on Medicare Advantage, with more than half of the savings going to patients. Consumers will always retain the power to choose the plan that works for them: If they don’t like their plan, they don’t have to keep it. We look forward to seeing the results of this step toward tougher negotiation within Medicare, and will continue efforts to expand negotiation tools throughout our programs.” CMS said the changes only apply to newly-prescribed medications and will begin on January 1, 2019.