Medicare Panel OKs Recommendations to Restructure Drug Benefit

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By Mindy Yochelson

April 7 — A slate of policy recommendations intended to increase the sustainability of the Medicare Part D outpatient drug benefit was unanimously approved April 7 by a panel that advises Congress on Medicare payment policy.

The recommendations by the Medicare Payment Advisory Commission are designed to alleviate some of the financial burdens on the program, particularly in the area of reinsurance for high-spending beneficiaries. They also would encourage the use of generics among low-income beneficiaries who receive a subsidy and provide drug plans with more flexibility in using management tools, including allowing them to remove two classes of drugs from six that are considered protected.

Balancing Act

The Part D drug benefit is 10 years old and needs some alteration to “balance beneficiary access to medicines with financial sustainability for taxpayers,” MedPAC staff said prior to the vote.

The recommendations will appear in MedPAC's June report to Congress.

Commission Chairman Francis J. Crosson called the three-part package “well balanced,” and members emphasized that the recommendations need to be regarded as an integrated whole, without the burden falling on any particular party.

However, patient advocacy, medical professional groups and the major drug manufacturer trade group have opposed some of the changes, particularly those involving the low-income subsidy and protected classes of drugs .

Three Groups

The recommendations are divided in three groups.

The first group asks Congress to change the Part D benefit to:

  • lower Medicare's individual reinsurance subsidy from 80 percent to 20 percent while maintaining Medicare's overall 74.5 percent subsidy of basic benefits;
  • exclude manufacturers' discount in the coverage gap from enrollees' true out-of-pocket (TrOOP) spending; and
  • eliminate enrollee cost sharing above the out-of-pocket threshold.

    The second group of recommendations would ask the Department of Health and Human Services to:

  • modify copayments for Medicare beneficiaries with incomes at or below 135 percent of poverty to encourage the use of generic drugs, preferred multisource drugs or biosimilars when available in selected therapeutic classes;
  • reduce or eliminate cost sharing for generics, biosimilars or preferred multisource drugs; and
  • determine appropriate therapeutic classifications for the purpose of implementing this policy and review the therapeutic classes at least every three years.

    The third group would recommend that the HHS:

  • streamline the formulary process for changes;
  • require prescribers to provide standardized supporting justifications with more clinical rigor when applying for exceptions;
  • permit plan sponsors to use selected tools to manage specialty drug benefits while maintaining appropriate access to needed medications; and
  • remove antidepressants and immunosuppressants for transplant rejection from the six protected classes.

    Criticism of Protected Classes Provision

    The Partnership for Part D Access, in a statement released after the April 7 vote, focused on the removal of the two classes of protected drugs. The Medicare Modernization Act required Part D plans to include on their formularies “all or substantially all” drugs in the protected classes which also cover anticonvulsants, antineoplastics, antipsychotics and antiretrovirals.

    The partnership, comprising groups such as the Epilepsy Foundation, the National Alliance on Mental Illness and the Janssen Pharmaceutical Companies of Johnson & Johnson, said it opposed the recommendation as restricting access to therapies for beneficiaries and violating longtime congressional protections. It quoted the Epilepsy Foundation as urging Congress to reject the suggestion and to instead consider strengthening the protected classes.

    Choices Available

    MedPAC staff said there were a number of generic choices in the two categories for plans to choose among.

    The Pharmaceutical Research and Manufacturers of America said that “taken together, these recommendations will significantly harm beneficiaries by eroding coverage and protections.”

    The recommendations to exclude manufacturer discounts in the coverage gap from enrollees’ true out-of-pocket spending “would in effect widen the coverage gap, increasing beneficiary out-of-pocket spending and hurting patients.” Inclusion of the manufacturer discount in the TrOOP calculation accelerates the rate at which beneficiaries reach the catastrophic phase and results in lower out-of-pocket spending.

    An analysis by Avalere Health, a consulting company, released March 30, projected that the recommendation would increase beneficiary out-of-pocket costs by $4.1 billion between 2017 and 2020.

    To contact the reporter on this story: Mindy Yochelson in Washington at

    To contact the editor responsible for this story: Janey Cohen at

    For More Information

    The Avalere analysis is at