President Trump jump-started some proposals for reducing the cost of prescription drugs when he created his American Patients First Blueprint in May 2018.
Unfortunately, drug costs are continuing to affect adults taking prescription medications—especially those who are uninsured. The CDC reports that 19.5% of uninsured adults in 2017 asked their doctors for a lower-cost medication, 11.4% didn’t take their medications as prescribed, and 5.4% used alternative therapies.
Most people taking drugs say they can afford their treatment, but about 25% have a difficult time paying for their medications, according to a poll by the Kaiser Family Foundation.
Here are four areas of reform touted as solutions to the problem:
Lowering OOP payments for Part D beneficiaries
This year saw changes to the Medicare Part D standard benefit in an effort to lower OOP payments paid by Part D beneficiaries.
Under the Bipartisan Budget Act of 2018 (BBA), Part D enrollees’ OOP costs for brand-name drugs in the “donut hole,” declined from 35% of total costs in 2018 to 25% in 2019, while the manufacturer discount increases from 50% to 70%. The Congressional Budget Office (CBO) estimates that these changes will reduce Medicare spending by $11.8 billion over a 10-year period (2018-2027).
Plans’ share of costs for brands decreased to 5% in the donut hole; however, insurers are responsible for 63% of the cost of generics while enrollees pay 37% for them in the gap.
Beneficiary OOP costs before moving into the catastrophic phase jumped from $5,000 in 2018 to $5,100 in 2019 and are expected to rise again in 2020 to $6,350.
The bulk of insurer responsibility is in the initial coverage period—75%—while Medicare is on the hook for 80% of total costs under catastrophic coverage after beneficiaries reach a threshold of $8,140.
Related article: Four Ways Hospitals Can Deal with Rising Drug Costs
“While this does create a perverse incentive, payers are still careful about the number and types of drugs they make available on their Part D formularies primarily due to concerns about adverse selection and its impact on overall drug spend,” says Brian Duffant, vice president, BluePath Solutions, a health economics outcomes research consulting firm in Los Angeles.
He acknowledges that insurers have limited ability to move beneficiaries into the donut hole and Medicare to keep them out of the catastrophic phase, based on the standard Part D benefit design (see graphic) that allows a patient to move through the phases of coverage based on total drug and patient OOP costs.
Legislation has not yet been introduced to modify the BBA coverage gap provisions; however, efforts are underway.
Pharmaceutical manufacturers are pressuring Congress to roll back the manufacturer discount from 70% to 63%, increase Part D plan-sponsor liability, and block an increase in the total amount beneficiaries must spend OOP on their prescription drugs before catastrophic coverage kicks in.
According to the Commonwealth Fund, these proposals would financially benefit drug manufacturers more than Medicare beneficiaries. Beneficiary spending in the coverage gap would be slightly reduced (far more for manufacturers), and Medicare spending under Part D would increase to cover the savings to beneficiaries and manufacturers.
