The Healthcare Leadership Council initiated a letter—signed by 371 patient advocacy groups, drug manufacturers, health plans and provider organizations—asking CMS Administrator Marilyn Tavenner not to move forward with the changes.

The proposed rule also provoked criticism from members of Congress in both parties. On Monday, Tavenner responded in a letter (PDF) to a bipartisan group of about 50 House members who urged her to change course.

Gone is the controversial suggestion to set a higher standard for mandating that plans pay for “all or substantially all” drug offerings in six categories: antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants and immunosuppressants. The proposal specifically would have stripped the label from antidepressants, immunosuppressant and eventually antipsychotics.

Also gone is a suggestion that each payer offer no more than two Part D plans in the same service area. So is a provision prohibiting Medicare Advantage plans from offering coverage options that replace plans that the CMS previously required the carrier to terminate or consolidate because of low enrollment. And finally, the CMS rolled back its intention to to set standards for plans' preferred provider networks, including requiring that they include any pharmacy that agrees to accept the terms.

“Given the complexities of these issues and stakeholder input, we do not plan to finalize these proposals at this time,” Tavenner said in the letter. “We will engage in further stakeholder input before advancing some or all of the changes in these areas in future years.”

Stuart Guterman, vice president for Medicare and Cost Control at the Commonwealth Fund, said the Obama administration's change of course “shows they are willing to listen to the feedback."

But the decision to abandon plans to enforce the "any willing pharmacy" provision for pharmacy networks was a blow to community pharmacists, who say the CMS was swayed by large retailers like Wal-Mart and pharmacy benefit managers that own mail-order services, which have benefited from the restricted networks that are now employed in about 70% of Part D plans.

“That's what drove a knife through my heart today,” said Jason Wallace, president of the Pharmacists United for Truth and Transparency, a coalition of independent pharmacists and pharmacy owners. “CMS recognized that there was a problem and basically someone way more powerful than you and I has convinced CMS otherwise."

When the CMS released the proposed rule in January, it projected it would save $1.3 billion over five years. However, the Pharmaceutical Care Management Association, which represents pharmacy-benefit managers, said the document, if finalized, would actually increase costs to the federal government by $1.2 billion to $1.6 billion in 2015, according to a Milliman analysis it commissioned (PDF). Milliman based its findings on a survey of Part D plans and pharmacy-benefit managers that provide coverage to more than two- thirds of the 18.4 million Medicare Part D beneficiaries.

Follow Virgil Dickson on Twitter: @MHvdickson