Bid Adieu to Medicare’s Expensive Specialty Drug Tier?


Medicare drug plans are increasingly placing more of their life-or-death drugs on their specialty tiers and that’s causing some concern.

But should the tier be eliminated?

Plan sponsors organize their formulary medications into categories or tiers, with each having its own copayment. The bottom tier, for example, is typically for generics and has the lowest cost-sharing.

Specialty tier drugs are on the opposite end, reserved for drugs costing at least $670 a month. These pricey and sometimes unique products treat complicated, potentially life-threatening conditions such as cancer and hepatitis, and chronic diseases like rheumatoid arthritis.

They’re subject to coinsurance in which a beneficiary pays a certain percentage of the allowed amount rather than a fixed dollar amount, or copayment. Coinsurance often leads to patients paying more out of pocket compared with copayments.

AARP, the large consumer group for the 50-plus crowd, keeps tabs on Medicare drug trends. It found that the percentage of drugs eligible for specialty tiers keeps rising.

And the Medicare agency in April expressed concern that the percentage of drugs eligible for the specialty tier continues to increase. It said it’s monitoring specialty tier trends on such issues as drug use.

Another issue with the specialty tier is that, unlike the other tiers, there’s no “exception process” allowed for drugs.

For drugs on other tiers, enrollees may obtain a costly drug at a lower rate under the exceptions process. But drugs placed on specialty tiers aren’t part of this process.

So with the high cost, the coinsurance requirement, and the no-exception rule, should specialty tiers be banished from Medicare Part D drug formularies?

That’s a good idea, Sheila M. Arquette, executive director of the National Association of Specialty Pharmacy, told me.

Formularies should be designed so that specialty medications are included on all tiers, according to Arquette, formerly director of pharmacy services at a New York managed care company. The specialty tier penalizes beneficiaries who require treatment with a specialty medication through onerous use management edits, along with the high out-of-pocket costs that stem from the coinsurance, she said.

Not all agree.

There are big implications for doing away with entire tiers that could potentially lead to higher costs for beneficiaries, Leigh Purvis, director of health services research at AARP’s Public Policy Institute, told me.

For one, coinsurance is not just for specialty tier drugs, she said. More plans are requiring coinsurance, rather than copayments, for all of their tiers, she said.

Drugs on lower tiers can have even higher cost sharing than the 33 percent Medicare permits for specialty tiers.

For example, the maximum cost sharing for the nonpreferred brand tier—brand-name drugs not included on a plan’s formulary—is 50 percent.

So if you eliminate the specialty tier, these drugs could be put on the nonpreferred brand tier. That could expose beneficiaries to even higher out-of-pockets, Purvis said.

Read my full article on recent comments about the specialty tier to the Medicare agency.

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