Medicare Monday: Another example of the competitive market at work in Part D

Hepatitis C is a devastating viral disease that can result in life-threatening and costly complications. Five years ago, the only available treatment for the disease often resulted in debilitating side effects and only cured half of patients – but thanks to new cures, cure rates have skyrocketed to upwards of 90 percent. Many patients are able to access these lifesaving medicines through the Medicare Part D program.

While we have seen false claims that spending on groundbreaking hepatitis C treatments would prove unsustainable for Medicare, evidence shows that the competitive structure of Part D has worked to keep costs low for beneficiaries and taxpayers.  

To account for spending trends over time, each year the Centers for Medicare & Medicaid Services (CMS) updates the Part D benefit parameters, such as deductibles, initial coverage limit and the out-of-pocket threshold, for the standard Medicare Part D drug benefit. These parameters are updated based on the Part D annual percentage increase (API) in average per capita expenditures for Part D covered drugs each year. For 2018, Part D parameters will increase by just 1.22 percent, a very modest increase when compared to the 2017 increase of 11.75 percent.

What does this significant change mean? The higher annual percentage increase in the last couple years was attributed in part to the availability of new hepatitis C treatments. But the competitive market works to keep costs down: As more hepatitis C treatments entered the market, competition among plans and strong negotiation in Part D drove costs for the medicines down, bringing the annual percentage increase in Part D parameters back down to levels in line with previous years.

The competitive market-based dynamic in Part D is a key reason why negotiated prices for hepatitis C medicines in the United States are often lower than in many European countries, according to an IMS Institute for Healthcare Informatics report. As we’ve talked about before, Part D fosters robust negotiation between plans and manufacturers for discounts and rebates on medicines.

Visit PhRMA.org/PartD to learn more about how Medicare Part D helps ensure that patients have affordable access to needed prescription medications.