Medicare Part D

The stand-alone Prescription Drug Plan (PDP) market — which was already in decline — is poised to take even more hits due to regulatory and legislative changes that are taking effect in 2024 and beyond, according to industry observers. Indeed, one expert who analyzed data from CMS’s 2024 Medicare Advantage and Part D “landscape files” predicts that “a lot of people are faced with pretty significant premium increases” next year.

There’s a complicated calculus driving that trend, explains Tom Kornfield, a senior consultant at Avalere Health. But both he and equities analyst George Hill agree that the Inflation Reduction Act of 2022 (IRA) is a major factor.

Retail prescription drug spending is expected to grow moderately throughout the next decade. But per capita out-of-pocket retail drug costs may decrease starting in 2024 due to the Inflation Reduction Act (IRA), a recent Peterson-KFF Health System Tracker study predicted.

Using National Health Expenditures Accounts historical and projection data from 2021, researchers found that per capita spending on retail prescription drugs has skyrocketed over the past three decades— from $101 in 1960 to $1,147 in 2021. Meanwhile, out-of-pocket prescription drug spending has been declining since the mid-2000s and is anticipated to drop by 8% by 2031.

Retail prescription drug spending is expected to grow moderately throughout the next decade. But per capita out-of-pocket retail drug costs may decrease starting in 2024 due to the Inflation Reduction Act (IRA), a recent Peterson-KFF Health System Tracker study predicted.

Using National Health Expenditures Accounts historical and projection data from 2021, researchers found that per capita spending on retail prescription drugs has skyrocketed over the past three decades— from $101 in 1960 to $1,147 in 2021. Meanwhile, out-of-pocket prescription drug spending has been declining since the mid-2000s and is anticipated to drop by 8% by 2031.

A Sept. 26 potential class action lawsuit brought by independent pharmacists accuses CVS Health Corp. of charging excessive direct and indirect remuneration (DIR) fees for Medicare Part D claims administered by the firm’s Caremark PBM division. The suit, filed in the U.S. District Court for the Western District of Washington, calls the DIR fees charged by Caremark “unconscionable,” and says that the vertically integrated managed care, retail and pharmacy giant breached “the covenant of good faith and fair dealing.” In a Sept. 27 press release, the National Community Pharmacists Association (NCPA) — a trade group of independent pharmacists that has recently lobbied in favor of strict regulation of PBMs — backed the lawsuit. “It’s payback time,” said NCPA CEO B. Douglas Hoey. “Finally, community pharmacies have a chance to recover DIR fees that were unfairly taken. PBMs have been gaming the system for a long time, and it’s time to turn the tables.”

Although CMS has released its list of the first drugs to be negotiated under the Inflation Reduction Act (IRA), questions surrounding the process, as well as other provisions of the law, still exist. During a recent webinar, Mark McClellan, M.D., Ph.D., the Robert J. Margolis Professor of Business, Medicine, and Policy, and founding director of the Duke-Margolis Center for Health Policy at Duke University, addressed some of those issues, including the real-world evidence that CMS is looking for and how the redesign of Medicare Part D will play out.

The Sept. 18 webinar was the second in a series presented by Innopiphany on navigating the IRA, following the initial one held June 20.

List prices for the 25 branded drugs associated with the highest Medicare Part D spending in 2021 have increased by an average of 226% since they first entered the market, according to a recent report from AARP’s Public Policy Institute. These drugs were responsible for $80.9 billion in total Medicare Part D spending in 2021.

Overall, lifetime price increases among the 25 drugs ranged from 20% to 739%, with all but one of them greatly exceeding the annual rate of inflation over the same period. The list price of Enbrel (etanercept), a treatment for rheumatoid arthritis and psoriatic arthritis, skyrocketed by 701% since entering the market in 1998.

The HHS Office of Inspector General will conduct a series of Medicare Advantage audits focused on diagnoses identified from unlinked chart reviews that resulted in higher risk-adjusted payments to MA organizations. For the risk adjustment program, CMS allows Medicare Advantage organizations to conduct chart reviews of enrollee medical record documentation to identify diagnosis codes that providers either did not originally give the MAO or provided in error. With unlinked chart reviews, MAOs do not have to include the specific date of service for previously unidentified diagnosis codes. In a 2021 report suggesting some MAOs were relying heavily on chart reviews and health risk assessments to achieve higher risk-adjusted payments, OIG previously recommended that CMS reassess whether it should allow unlinked chart reviews to be sole sources of diagnoses for risk-adjusted payments. The audit reports are expected to be released in 2026, according to a work plan summary posted this month.

A bill that “delinks” PBM pay from drug list prices and utilization in Medicare Part D could “shift billions of dollars annually from patients and taxpayers to drug manufacturers and retail pharmacy companies,” according to a new paper funded by the PBM industry’s main trade group. However, some experts argue that the research may not offer a completely accurate assessment, even if it makes some valid points.

“I’m a little bit of two minds on this paper,” says Matthew Feidler, a senior fellow at The Brookings Institution’s Schaeffer Initiative on Health Policy. Feidler, who was not involved in the National Bureau of Economic Research (NBER) paper, recently coauthored an issue brief assessing the current landscape of PBM reform proposals.

CMS revealed on Aug. 29 the list of the initial 10 drugs that will be subject to drug price negotiations in the Medicare program starting in 2026. However, even before the agency’s announcement, several pharmaceutical companies and other stakeholders filed lawsuits seeking to curtail the negotiation program’s implementation.

During a KFF webinar on Sept. 12, a Medicare policy expert and two attorneys discussed the legal challenges and potential ramifications.

Zachary Baron, associate director of the Health Policy and the Law Initiative at Georgetown University’s O’Neill Institute, said that if courts rule in favor of the drug manufacturers, there could potentially be changes in how Medicare reimburses hospitals and providers, among other consequences.

List prices for the 25 branded drugs associated with the highest Medicare Part D spending in 2021 have increased by an average of 226% since they first entered the market, according to a recent report from AARP’s Public Policy Institute. These drugs were responsible for $80.9 billion in total Medicare Part D spending in 2021.

Overall, lifetime price increases among the 25 drugs ranged from 20% to 739%, with all but one of them greatly exceeding the annual rate of inflation over the same period. The list price of Enbrel (etanercept), a treatment for rheumatoid arthritis and psoriatic arthritis, skyrocketed by 701% since entering the market in 1998.