The Right Medicine for Drug Prices
Earlier this year, Congress took steps to close the infamous Medicare drug “donut hole” a year early through provisions included in the Bipartisan Budget Act (BBA) of 2018. However, these changes, while ostensibly meant to address prescription drug affordability for Medicare patients, were a last-minute addition that missed the opportunity to pursue meaningful improvements.
Instead of tackling long-term, meaningful reductions in cost-sharing or direct benefits, the policy simply shifts responsibility from one industry to another. Setting aside how the changing dynamic may affect incentives for plans to manage costs, the real problem is that this action gives the illusion of progress while foregoing steps that could more directly improve affordability for patients.
The Medicare Part D program has provided crucial access to prescription drug coverage for tens of millions of beneficiaries since its implementation. Additionally, between 2006 and 2014, over 22,000 deaths were prevented due to a resulting reduction in hospital admissions. This decrease in costly hospital visits has saved Medicare nearly $1.5 billion each year. Simply stated, ensuring affordable access to prescription drugs can help improve health outcomes and reduce federal spending.
That said, there is always room for improvement. Both the administration and some leading members of Congress have indicated they want to address prescription drug access and affordability issues in Medicare and beyond. There are some important steps to make bipartisan progress that should be taken this year.
First and foremost, patient cost-sharing should be based on the price ultimately paid by the plan for the drug in question. Under current practice, beneficiary cost-sharing is artificially high because it generally is based on list prices (plus a dispensing fee), even though the plans acquire many drugs at a deep discount relative to list prices. In some cases, this means patients actually pay more than the cost of the drug. In other cases, high effective cost-sharing reduces access and adherence to needed medications. For example, public reports have indicated that plans purchase insulin at discounts of 60–70 percent or more from the list price. Yet because the savings are not passed on, many patients with diabetes forego this critical medicine.
Passing the discounts on is harder than it sounds, but that is not an excuse for the status quo. Ideally, this change would be enshrined in statute to ensure that patients always benefit directly from the discounts negotiated on their behalf. However, the administration could also pursue this through its rulemaking or, potentially, demonstration authority if Congress fails to act. Importantly, this is yet another opportunity for Medicare to lead the way in payment policy, as this problem is prevalent in private plans serving the working population and their families as well.
Second, there is a looming issue that Congress needs to address this year. The so-called subsidy “cliff” that was created during the drafting of the Affordable Care Act brought some relief to beneficiaries by allowing access to catastrophic coverage earlier. However, budget rules in effect at the time dictated that the provision had to expire 10 years after enactment. Current estimates indicate that the threshold will immediately increase by $1,250 in 2020, leaving high-need beneficiaries on the hook for a portion of the additional spending. Next year, plans bidding to cover Medicare patients for 2020 will have to take this into consideration unless Congress acts to permanently reset it before that process begins.
Third, there is no good reason to require beneficiaries to have “skin in the game” once they are in the catastrophic phase of coverage. Virtually no other payer requires residual cost-sharing once a patient crosses the catastrophic threshold. Establishing a true out-of-pocket cap for beneficiaries could provide significant relief to beneficiaries who suffer from chronic conditions or need high-cost treatments.
In my time on Capitol Hill, I had the privilege of working with lawmakers on both sides of the aisle to improve the Medicare program. I know there is an appetite to fix issues that threaten the success of Part D and ensure that beneficiaries continue to have access to the best possible prescription drug coverage at affordable prices. These changes should be addressed before the end of the year. Alternatively, if Congress is unwilling or unable to act, the administration should step forward to use its considerable authority to help lower costs for beneficiaries. The time for talk has come and gone; the time for action is now.
Cybele Bjorklund is a health policy expert focused on improving prescription drug affordability for Medicare beneficiaries and others. Bjorklund spent 20 years in leading staff roles in Congress, most recently serving as the Democratic staff director for the Subcommittee on Health and the senior health advisor for Democrats on the Committee on Ways & Means for 14 years.
