Here’s one way Washington is moving to slash seniors’ prescription-drug costs

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While drug-pricing reform legislation is mired in Washington gridlock, a federal regulator is rolling out reforms that could lower prescription-drug costs for many seniors as soon as next year.

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a proposed rule Medicare prescription-drug plans would be required to pass on price discounts from pharmacy to consumers over the pharmacy counter, issued last week by the Centers for Medicare and Medicaid Services.

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CMS estimates that the rule change will reduce costs for Medicare beneficiaries by about $21.3 billion over 10 years.

“It’s about time,” said Antonio Siaccia, CEO of drug-pricing research nonprofit 46Brooklyn Research, of the proposal. The issue of pharmacy price concessions, he says, “has been one of the wounds of the celebration” within Medicare Part D prescription-drug benefits.

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Price breaks, which Part D plan sponsors and pharmacy benefit managers charge pharmacies after the point of sale, have skyrocketed in recent years. According to CMS, pharmacy price concessions increased by more than 107,000% to $9.5 billion between 2010 and 2020. Currently, Medicare beneficiaries’ out-of-pocket drug costs are typically based on prices that don’t factor into those concessions — and that means they’re paying amounts that are “relative to reality.” have grown rapidly,” says Siakia.

,The issue of pharmacy price concessions “has been one of the wounds of the celebration” within Medicare Part D prescription-drug benefits.,

–Antonio Siaccia, CEO of 46Brooklyn Research

Under price-concession arrangements, negotiated between pharmacies and Part D plan sponsors or their PBMs, the amount charged to pharmacies after the point of sale is often tied to certain performance metrics, such as patients’ medication adherence. The Pharmaceutical Care Management Association, a trade group for pharmacy benefit managers, states that pharmacy price concessions are designed to improve quality and safety for Medicare beneficiaries. “We look forward to working with CMS on ways to increase the use of value-based contracts rather than limit them to this important tool,” business group president and CEO Jesse Scott said in a statement.

While comprehensive drug-pricing reform is in limbo, the CMS proposal could be effective

Critics say the relationship between price concessions and pharmacy quality is ambiguous, and systems are increasingly pushing pharmacies out of business in increasing quantities. A mail-order pharmacy automatically shipping refills can generate higher quality scores even if the patient never takes the drug, says Douglas Hoy, CEO of the National Community Pharmacists Association, a trade group for independent pharmacies. Price concessions, he says, cost each member of the group about $100,000 annually on average, or about 3% of their average revenue.

While seniors with hefty drug costs will see the biggest savings from the rule change, some seniors may see their costs increase. This is because Part D plans that are forced to share price concessions with consumers over the pharmacy counter can increase their premiums to compensate.

But the end result may be something closer to how insurance is actually supposed to function, Medicare experts say. Under the current system, sick patients—senior prescriptions who are picking up a lot of prescriptions—are generating more price concessions for plans, leaving Part D premiums slightly lower for all. The “system” shifts costs to those who have the most expenses, and we don’t want health insurance to be that way, says Julie Carter, senior federal policy associate at the Medicare Rights Center, a nonprofit consumer services group. Do the work Policymakers should make sure that “people with high spending don’t starve to dry out,” she says. “It could be that a more reasonable system has a slightly higher premium.”

CMS says the rule changes will also benefit senior citizens shopping for Part D plans, allowing them to make more accurate comparisons between plans’ premiums and cost-sharing amounts. It suddenly won’t be easy to compare plans, says Carter, but consumers will benefit if premiums more accurately reflect the coverage provided.

CMS says the rule would cost the federal government about $40 billion over 10 years, as the government pays a portion of the cost of coverage under Part D plans.

Whereas build back better With the spending bill and many of its drug-pricing reform provisions in limbo, policy experts give the CMS proposal relatively good chances of taking effect — and seniors could start to feel its impact within a year. The proposed rule will take effect in 2023, and CMS is accepting comments on the proposal until March 7.


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