NCPA - National Center for Policy Analysis

Reforming Medicare Part D to Improve Access to Medicines

June 17, 2016

(A version of this Health Alert was published by Forbes.)

Specialty drugs are typically high-cost prescription drugs used to treat complex chronic and/or life threatening conditions. Many do not have substitutes available at lower costs.  Over the last decade, the Medicare Part D benefit has imposed high out-of-pocket costs as a way to control costs of specialty drugs. This is causing many patients not to fill prescriptions. Some patients may be adding costs to the system by getting drugs more expensively by injection in doctors' offices, where they are covered by Medicare supplemental insurance, writes Fellow John R. Graham in NCPA's Healthblog.

Prescription drug plans maintain lists of drugs, called formularies, which define their benefits in terms of which drugs are covered by the plan. Over the years, formularies have become tiered, making patients liable for higher out-of-pocket costs for medicines placed on higher tiers.

Most prescription drugs plans offered under Medicare Part D have five tiers, according to research by Jack Hoadley and colleagues at the Kaiser Family Foundation. The fifth tier consists of specialty drugs, which Medicare defines as drugs that cost at least $600 per month.

These drugs are subject to very high coinsurance of up to 33 percent under Part D's initial coverage period. This year, after having spent $2,960 on drugs, a Medicare patient who does not qualify for low-income subsidies hits the coverage gap (or "doughnut hole"). In the doughnut hole, the patient pays 45 percent of the drug cost. Eventually, the patient's out-of-pocket liability declines to five percent after the patient. This benefit design is reducing access to medicines used by very sick patients, according to research conducted by Professor Jalpa A. Doshi, of the Perelman School of Medicine at the University of Pennsylvania, and colleagues (and presented at the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research in May).

Doshi and colleagues examined the relationship between out-of-pocket costs and initiation of treatment among Medicare Part D beneficiaries newly diagnosed with leukemia in 2011 through 2013. These cancer patients were prescribed tyrosine kinase inhibitors (such as Gleevec®). Although in clinical use for just a decade and a half, these drugs have transformed leukemia from a death sentence to a chronic condition for many patients.

The average out-of-pocket cost for a 30-day supply was $2,600 or higher for Medicare Part D beneficiaries who did not receive low-income subsidies. This caused many of these patients not to fill their prescriptions. Low-income patients got extra help with their costs, resulting in out-of-pocket payments of just $5 or less. Only 21 percent of the patients with potentially high out-of-pocket costs had initiated treatment within one month of their diagnosis, versus 53 percent of patients with nominal out-of-pocket costs. And this remained a problem in subsequent months. Within three months, the proportions were 36 percent versus 65 percent. At six months, they were 45 percent versus 67 percent. The patients with potentially high out-of-pocket costs may have struggled to pay the high coinsurance for their medicine and hence may have delayed or abandoned filling their prescriptions.

Doshi and colleagues found similar results for Medicare beneficiaries with rheumatoid arthritis, from 2007 through 2009. Although the study design was different, the difference in outcomes between non-poor and low-income patients was similar. During the initial coverage period at the start of a new plan year, the non-poor paid (on average) $484 for a 30-day supply of biologic medicines, while low-income patients paid only $5.  Only 61 percent of the non-poor filled their prescriptions, versus 73 percent of the low-income patients.  Even among those who filled their prescriptions, non-poor patients were more likely to have interruptions in their biologic treatments than the low-income patients.

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