The Lower Cash Price Policy anticipates that some Medicare Part D beneficiaries will be able to find lower costing Medicare Part D drugs using pharmacy drug discount cards or other discount program during their Initial Deductible or Coverage Gap (Donut Hole) - where the Medicare beneficiary is 100% responsible for the cost of their Medicare Part D drugs.

Medicare beneficiaries could then purchase medications at a lower price and not use their Medicare Part D plan because the plan had a higher negotiated retail prices. Members of Medicare Part D plan's could then submit their receipts for their non-Part D purchases, and if the medications were found on their plan's formulary, they would receive credit for the purchase toward their total drug spending or TrOOP limit (the Donut Hole Exit Point).

The Lower Cash Price Policy was specifically limited "in order to ensure that enrollees:
(1) do not unwittingly forego plan funded coverage, which in most cases will be the lowest price available given the price concessions built into the plan’s negotiated prices;
(2) have the benefit of plan drug utilization review and other safety edits that can only be provided if the plan adjudicates the claim; and
(3) proceed through the benefit as quickly as possible in order to reach catastrophic coverage."

The Lower Cash Price Policy was then updated or clarified slightly in the Medicare Prescription Drug Benefit Manual, Chapter 14, Coordination of Benefits (Rev. 12, 03/19/2010) and adds the consideration of enhanced Medicare Part D plans that have a $0 deductible and some form of coverage in the Donut Gap or Donut Hole.  In such situations, the Lower Cash Price Policy would not apply unless the Medicare beneficiary is responsible for 100% of the drug cost.

50.4.2 – Beneficiary Cash Purchases
(Rev. 12, Issued: 03-19-10, Effective Date: 01-01-10; Implementation Date: 01-01-10)

Although CMS expects it to happen rarely, an individual may be able to obtain a lower price at a network pharmacy than that which his or her plan charges (the plan’s negotiated price) in any applicable coverage gap or deductible. This may be possible if the pharmacy is offering a “special” price or other discount for all customers, or if the beneficiary is using a discount card, and the beneficiary is in any applicable coverage gap or deductible phase of his or her Part D benefit and is able to receive a better cash price for a covered Part D drug at a network pharmacy than the sponsor offers via its negotiated price. In this situation, he or she may purchase that covered Part D drug without using his or her Part D benefit or a supplemental card. The enrollee’s purchase price for the discounted drug will count toward total drug spend under his or her Part D benefit and TrOOP balance provided the Part D sponsor becomes aware of it.

The enrollee must take responsibility for submitting the appropriate documentation to his or her plan in order to have the amount count toward his or her total drug spend and TrOOP balances. FN2  Sponsors must accommodate the receipt of such information directly from enrollees and adjust total drug spend and TrOOP balances accordingly consistent with their established processes and clear instructions for these enrollee paper claim submissions.

FN2 Note that in cases where a pharmacy offers a lower price to its customers throughout a benefit year, this would not constitute a "lower cash price" situation that is the subject of this guidance. For example, Walmart and other retailers recently introduced programs offering a reduced price for certain generics to its customers. The low Walmart price on these specific generic drugs is considered Walmart’s “usual and customary” price, and is not considered a one-time "lower cash" price. Part D sponsors consider this lower amount to be “usual and customary” and will reimburse Walmart on the basis of this price. To illustrate, suppose a Plan's usual negotiated price for a specific drug is $10 with a beneficiary copay of 25% for a generic drug. Suppose Walmart offers the same generic drug throughout the benefit for $4. The Plan considers the $4 to take the place of the $10 negotiated price. The $4 is not considered a lower cash price, because it is not a one-time special price. The Plan will adjudicate Walmart’s claim for $4 and the beneficiary will pay only a $1 copay, rather than a $2.50 copay. This means that both the Plan and the beneficiary are benefiting from the Walmart “usual and customary” price, and the discounted Walmart price of the drug is actually offered within the Plan’s Part D benefit design. Therefore, the beneficiary can access this discount at any point in the benefit year, the claim will be adjudicated through the Plan's systems, and the beneficiary will not need to send documentation to the plan to have the lower cash price count toward TrOOP.

Note that this lower cash purchase policy does not apply in any phase of an enrollee’s Part D benefit in which he or she is liable for any less than 100 percent cost-sharing. In other words, it does not apply outside of any applicable coverage gap or deductible phase of his or her benefit. CMS has limited the policy’s applicability in order to ensure that enrollees: (1) do not unwittingly forego sponsor-funded coverage, which in most cases will be the lowest price available given the price concessions built into the plan’s negotiated prices; (2) have the benefit of plan drug utilization review and other safety edits that can only be provided if the plan adjudicates the claim; and (3) proceed through the benefit as quickly as possible in order to reach catastrophic coverage. It is unlikely that the use of discount cards or other special discounts will be a significant source of savings for most enrollees. It is possible, however, depending on the cost of the drug that if an enrollee fails to submit even one claim for a purchase made under the circumstances explained above, the enrollee will ultimately spend more than he or she would have under his or her plan’s negotiated prices.

Since the lower cash price policy applies only when the beneficiary is in a Part D benefit phase where the beneficiary has 100 percent cost-sharing; i.e., during any applicable deductible or coverage gap phase of his or her benefit, it is the phase of the benefit the beneficiary was in on the fill date that is relevant to the applicability of this policy. Therefore, it is the fill date that must be used for processing the claim. Further, in the absence of a coverage exception, the claim must be for a covered Part D drug that is included on the sponsor’s formulary and accessed from a network pharmacy. Edits by the Part D sponsor to ensure that these requirements are met are appropriate.

In an enhanced alternative benefit plan without a deductible [$0 deductible Medicare Part D plan], there is no applicable deductible phase during which the lower cash price policy will apply. However, if an enhanced alternative benefit plan offers coverage of a subset of drugs through the gap, while the policy is not applicable to those drugs covered by the plan through the gap, it is applicable to all other covered Part D drugs for which the beneficiary has 100 percent cost-sharing.

It should be noted that organizations or entities offering discount cards or other discounted price arrangements must comply with all relevant fraud and abuse laws, including, when applicable, the Federal anti-kickback statute and the civil monetary penalty law prohibiting inducements to beneficiaries. The HHS Office of the Inspector General (OIG) enforces Federal fraud and abuse statutes, and all questions regarding the compliance of specific arrangements with these statutes should be referred to the OIG.

This section reflects CMS’ current beneficiary cash purchase policy. However, if significant issues arise, CMS will revisit the policy. [highlights and emphasis added]