WASHINGTON – The Medicare Payment Advisory Commission will begin work on developing a plan to overhaul the Medicare Part D program.
Commission members, after hearing about a pair of options related to affordability of specialty drugs and biologics, instructed staff to pursue the option that would essentially amount to an overhaul to the program.
Commission stafftwo options to the commission at a meeting on April 5. Gaining no traction was the easier of the two fixes that could be implemented rapidly – setting a maximum out-of-pocket limit on each specialty tier prescription. The staff used the lesser of a 33% coinsurance (which is generally calculated against the list price of the drug) or $200 for a 30-day supply as the limit.
That first option gained little traction with commission members, who instead gravitated to the option that would restructure the Part D prescription drug benefit to provide stronger formulary and pricing incentives.
As proposed, the second option would replace the coverage gap discount with a manufacturer “cap discount” and restructure the catastrophic benefit.
Commission staff members said that this would help provide stronger incentives for the use of generics, increase affordability for enrollees and the Medicare program, and provide stronger incentives for plans to manage spending. Staff members also said it could provide a disincentive for manufacturers to set high launch prices and/or increase prices rapidly.
The basic plan design would have 25% coinsurance after the deductible is met, up to a to-be-determined out-of-pocket threshold. This would be followed by catastrophic coverage, with details about who pays and how much still to be determined. Currently, the basic structure of the Part D program calls for plan members to pay a 5% coinsurance.
While speaking favorably about the concept of redesign, MedPAC member, former vice president of global health policy at Johnson & Johnson, noted that it might be a tough sell.
“The difficulty we are going to have, or Medicare will have, in moving to something like this is that people are now entrenched in the current [program],” she said. “As much as I like this, I think it’s daunting moving from the current system.”
She said that if there is a focus on getting the benefits right, it will be a much better approach that could result in lower drug prices.
MedPAC member Amy Bricker, vice president of supply chain strategy at Express Scripts, called for consideration of additional reform to the current program’s six protected classes of drugs, within which plans are required to cover all or substantially all products.
She also suggested providing Part D plans with the ability to exclude high-priced drug launches from their formularies, something they cannot do now.
“Having the ability to exclude a product at launch is the single biggest tool that a commercial plan has and manufacturers fear,” she said, noting that it gives plans leverage, especially if there is little or no competition to that product.
Ms. Bricker came out against the consensus of other members of the commission and supported the out-of-pocket cap in addition to the overhauled Part D proposal.
She noted that the background material provided to the commission offered a suggestion that coinsurance would provide pressure on manufacturers to lower list prices because of the difficulty it puts on beneficiaries. “It doesn’t,” she said. “You can get a headline in the Wall Street Journal. You can hear about these stories in pockets. But it does not impact the decisions of the manufacturer.”
MedPAC staff will be working in the coming year to work out the details of the restructured proposal.