On January 12, 2017, during the second session of Medicare Payment Advisory Commission’s (MedPAC’s) January meeting, MedPAC Commissioners evaluated current data concerning trends in Medicare Part D spending and discussed future direction for studies regarding updating the program to reflect current markets. The Commissioners reviewed information about the numbers of stand-alone and Medicare Advantage (MA) prescription drug plans participating in Part D for 2017 and the types of benefit designs they offer, including the number of plans with no premium available to individuals receiving the low-income subsidy (LIS).
While no formal vote was held, the Commission endorsed the recommendations for spring discussion topics and advised that the overall Part D program be reviewed for modern relevance and efficiency. Several Commissioners raised concerns that the program details, created in 2003, were no longer relevant to the current market.
Staff Presentation
Several analysts presented key trends in Part D program spending, drug prices, and strategies plan sponsors use to manage spending. According to staff analysts, in 2016, seventy-two percent (41 million of 57 million Medicare beneficiaries), were enrolled in Part D plans, and another three percent received retiree drug subsidies. The analysts also noted that sixty percent of all Part D enrollees had Prescription Drug Plans (PDPs) in 2016, compared to the forty percent that had Medicare Advantage Prescription Drug (MA-PD) Plans. While there will be sixteen percent fewer PDPs offered in 2017, the analysts assured everyone that broad choice will still exist for beneficiaries – there will be eighteen to twenty-four plan choices in each region.
The analysts also noted that Part D is seeing consistent growth. While premiums have remained stable between $29 and $31 from 2009 to 2016, enrollment has grown at an average of six percent each year, rising from 24 billion beneficiaries in 2007 to 41 million in 2016. The rate of growth has been higher among non-LIS enrollees than among LIS enrollees.
The analysts identified manufacturer rebates and specialty pharmacies as two essential strategies to manage Part D premiums. Specialty drugs are accounting for greater shares of drug spending, and manufacturers are using limited networks of specialty pharmacies that do not fall under covered plan pharmacy networks.
Direct and indirect remuneration (DIR) was also discussed, and how it has grown, doubling in drug classes with competing therapies since the start of the program. The increase in brand prices more than offsets the effects of generic use. Incentives for plans to put higher-price, high-rebate drugs on formularies is growing due to the generous eighty percent reinsurance rate set by CMS’s formula. In June, the Commission recommended that this rate be lowered to twenty percent, due to reinsurance growing faster than any other category of Medicare spending.
Commissioner Discussion
The Commissioners expressed an “urgent” need to reevaluate the Part D program’s applicability to the modern healthcare system. Commissioner Amy Bricker introduced the notion that the current program does not allow plans to be competitive with the commercial market, thereby crippling their ability to manage rising drug costs. She suggested the ability to make mid-year changes to plan formularies as one example of additional flexibility for plans. She also suggested that more plans would embrace taking on the risk of investing in sole source products if they had more flexibility to manage their benefits, similar to commercial markets.
Commissioner Jack Hoadley, suggested that more transparency between plans and beneficiaries would make extra flexibility for plans viable. He noted that if beneficiaries understand why the changes are being made to their plans, and how they can appeal to retain their old structures, there is likely to be more trust. He proposed that the Commission work together to come up with ideas as to how to better engage plans and beneficiaries, because the current system does not do much to encourage communication. He also asked that the star ratings tool be reworked to better reflect beneficiary experience with specific plans.
Commission Chairman Jay Crosson summed up the discussion with two themes, both of which most Commissioners felt need “urgent action”: (1) is the Part D program pharmaceutically “appropriate”? and (2) is there a need for the program to be updated to better reflect the challenges of the current marketplace. Lastly, Chairman Crosson recommended that the Commission explore incorporating value-based payment methodologies in future discussions.