Last week, Sen. Jon Tester and Sen. Steve Daines jointly announced support for new Medicare rules to reduce out-of-pocket prescription drug costs for individual Medicare enrollees. The rules also aim to protect local pharmacies from uncertainties of discounts demanded by Part D plans up to six months after a prescription was filled.
Daines and Tester were among 21 senators who signed a letter to CMS Administrator Seema Verma encouraging her to adopt the agency’s proposal to increase price transparency and accuracy.
The problem that CMS and the senators are trying to solve is a complex arrangement for rebates and discounts for Medicare Part D plans and pharmacy benefit management companies. Medicare enrollees’ out-of-pocket costs are based on the price charged at the time they get their prescription filled. But after the sale, insurance and management companies get discounts and rebates they have previously negotiated. The Medicare enrollee doesn’t directly benefit from those “price concessions.”
“We have heard from numerous pharmacies in our communities — many of which are rural or medically under-served — that these claw-back fees cause so much uncertainty that they do not know if they can continue to serve American families,” the senators wrote. “They do not know when the fees will be collected, how large a fee they will have to pay, and if the final amount they are paid will actually cover the cost of dispensing the drugs”
CMS describes the implications of Medicare pharmacy price concessions this way:
Beneficiaries’ cost-sharing is calculated based on the drug price at the point-of-sale, without regard to rebates and other price concessions received after the point-of-sale. Therefore, while direct and indirect remuneration may hold down total program expenses (and beneficiary premiums), it does not reduce the cost of drugs for beneficiaries at the point-of-sale.
Medicare pays the Part D cost-sharing obligations on behalf of 12 million low income Medicare beneficiaries, many of whom are dually eligible for both Medicare and Medicaid. As the growth of rebates and other price concessions places more of the burden on beneficiary cost-sharing, Medicare’s costs for these beneficiaries grows. Higher beneficiary cost-sharing also results in the quicker progression of Part D enrollees through the Part D drug benefit phases and potentially leads to higher costs in the catastrophic phase, where Medicare liability is generally around 80 percent.
High-priced drugs, now increasingly packaged with high rebates, shift more and more of the drug spend into the catastrophic phase where Part D plans are responsible for only 15 percent of costs.
Rebates grew from an average of $26 per Medicare beneficiary per month in 2010 to $50 in 2015. Discounts and rebates have grown faster than overall Part D drug costs and totaled $23.6 billion in 2015 out of $137.4 billion in gross charges.
We are very pleased to see our two U.S. senators working to correct this unfair, undisclosed cost shift to seniors who need medicine. But we want them to do more.
Pharmacy price concessions have been growing for years. Tester cosponsored legislation in 2016 (a bill introduced with U.S. Sen. Shelly Moore Capito, R-West Virginia), “to prevent pharmaceutical ‘middlemen’ from charging unjustified fees on small pharmacies that serve seniors.”
Tester and Capito reintroduced the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act a year ago as S.413. It has 13 Republican and Democratic sponsors, but Daines isn’t one of them. In the house last February, Rep. H. Morgan Griffith, R-Virginia, introduced a similar bill, HR1038, which has 60 cosponsors. Montana’s lone House member, Greg Gianforte, isn’t among them.
We call on Daines and Gianforte to sign onto legislation that will affirm proposed administrative rules. If Congress was doing its job, the law already would have been changed. As it is, our delegation must prod CMS to make the changes Congress seems incapable of passing.