Few federal health care programs have been more successful than Medicare Part D, which provides prescription drug coverage to seniors and Americans with disabilities enrolled in Medicare. While some provisions of the Inflation Reduction Act (IRA) are likely to strengthen Part D and address some of the affordability challenges patients face, the law’s price setting provisions threaten access to medicines.
What works in Part D:
- More than 50 million individuals have comprehensive drug coverage due to Part D. Since its inception, seniors enrolled in a Part D plan have experienced an 8% decrease in hospital admissions, a 2.2% reduction in risk of mortality and an 18.3% drop in non-emergency emergency department visits.
- Part D beneficiaries have historically had a variety of plans to choose from, ranging from 24 to 32 options in each state in recent years. Beneficiaries can use the Medicare Plan Finder to compare different plans and determine which fits best based on coverage of specific prescriptions and out-of-pocket costs.
What isn’t working in Part D:
- Part D coverage has been eroding in recent years. Part D plans are covering fewer medicines and increasingly forcing patients to jump through more hoops to get access. In 2021, roughly half of all Part D medicines were subject to some form of utilization management, such as step therapy or prior authorization. Further, more than 9 in 10 oral oncology specialty medicines were subject to prior authorization in 2020.
- Seniors are paying more in out-of-pocket costs. The insurers and PBMs that administer Part D plans negotiate significant rebates and discounts. According to MedPAC, manufacturer rebates lowered total gross Part D expenditures by 23% in 2021. Despite this, 92% of seniors’ out-of-pocket spending on brand medicines is based on the undiscounted list price. And 9 out of 10 seniors taking a brand medicine are exposed to the full price through deductibles and coinsurance – even when their insurer and their PBM are paying far less.
How the IRA makes it worse:
- Yes, the IRA took important steps to lower out-of-pocket costs in Part D. These include setting a $2,000 annual cap on what seniors pay for their medicines and allowing seniors to spread their out-of-pocket costs throughout the year to make them more predictable starting in 2025 – two policies PhRMA has long supported.
- But the law failed to rein in the insurers and PBMs administering Part D plans who are leaving patients with higher costs and less access to medicines. Without addressing this abuse, insurers and PBMs will continue to prioritize profits over robust coverage options for seniors, including making seniors pay more for their medicines than they do.
- Making matters worse, seniors may not benefit from the IRA’s price setting provisions and could actually see their access to medicines restricted, as noted in a recent Health Affairs piece. Part D insurance plans are required to cover medicines that are selected for price setting, but they can still impose utilization management to restrict access. Insurers can also move medicines – including those that are price set by the government – to more expensive, non-preferred and specialty formulary tiers that have higher out-of-pocket costs. And Part D plans may stop covering some medicines altogether since they are only required to cover a minimum of two medicines in most therapeutic classes, which could be the price-set medicine and one other.
As CMS begins to implement the IRA’s price setting provisions and the other changes made to Part D in the law, seniors are likely to face more barriers to their medicines – both those impacted by government price setting and treatment alternatives. It’s important for policymakers to closely monitor and work to mitigate this and other unintended consequences. At the same time, Congress needs to fix the problems left unaddressed in the law, including insurer and PBM practices that are driving up seniors’ costs.
Learn more at PhRMA.org/IRA.
Nicole Longo
Nicole Longo is Deputy Vice President of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.
Nicole Longo
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Government Price Setting
Part D
Medicare
IRA changes to Part D risk access to medicines
IRA changes to Part D risk access to medicines