Medicare Drug Benefit Boosts Pharmaceutical Use - Pharmaceutical Technology

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Medicare Drug Benefit Boosts Pharmaceutical Use
Expanded access to drugs for seniors has increased demand and focused attention on costs.

Pharmaceutical Technology

Other leading therapy classes with more than 20 million prescriptions filled include treatments for diabetes, pain, and ulcers. Rounding out the top 10 were anti-infectives, thyroid hormones, antithrombotics, and seizure treatments.

Providing drug benefits to some 3.4 million seniors who previously lacked coverage has had a noticeable effect on use patterns and compliance. For example, IMS notes that patient use of proton-pump inhibitors (PPIs) increased by 2.7% because of new prescriptions, many written for patients with new coverage who switched from over-the-counter drugs to prescription products. Similarly, prescriptions for angiotensin II antagonists increased by 1.5% as a result of new therapy starts, and by another 2.4% because of improved compliance. About 37 million prescriptions filled under Part D were written for individuals who would have had to pay for the drug out-of-pocket in 2005. The formerly uninsured paid 60% less per prescription on average, while seniors with previous third-party coverage saved 17% per prescription.

Narrow gap

Another factor spurring Medicare drug use is that the much-feared donut hole appears to have affected relatively few Medicare patients. Only 6% of beneficiaries fell into the coverage gap in 2006, and most of those did not reach the hole until late in the year, thus reducing the period of time when they had to pay the full cost for medicines. The numbers are fairly low because low-income beneficiaries are protected from the gap, and many seniors did not spend more than the $2250 basic coverage limit. Moreover, some Part D and MA plans offered gap coverage in the program's first year.

However, of those 3 million seniors who did fall into the donut hole, nearly 25% dropped medicines for chronic conditions during the time they lost coverage. In coming years, the donut hole may be a bigger problem for beneficiaries because PDPs have dropped brand-name drug coverage within the gap. A few insurers such as Humana (Louisville, KY) offered similar plans in 2006, but these plans attracted heavy drug users, and use far exceeded initial projections. Most insurers dropped premium donut-hole coverage for 2007. The one insurer that continued to offer the coverage, Sierra Health Services (Las Vegas, NV), suffered a huge loss and was bought by UnitedHealth (Minneapolis, MN), which is not expected to maintain the program. In its March 2007 call letter to plans outlining Part D requirements for 2008, CMS said that sponsors may offer more than two PDPs if the additional plan covers at least some brands in the donut hole as part of "limited" gap coverage. But most plans are limiting gap coverage to generics, leaving seniors largely on their own to pay for brands.

Pricing pressures

The prospect that beneficiaries who hit the gap will face hefty drug expenditures puts more pressure on plans and policymakers to curb drug prices for all Part D enrollees. Earlier this year, Congress debated legislation to eliminate the noninterference clause in the Medicare program, which prevents the federal government from negotiating prices for all Part D plans. The bill failed, largely because the Congressional Budget Office (CBO) and other analysts predicted that public disclosure of drug prices and rebates would save little money without also establishing a national formulary—and might actually discourage big discounts from manufacturers.

Even without legislation that makes drug pricing more transparent, Rep. Henry Waxman (D-CA) and other program critics are keeping a close watch on Medicare drug costs and formularies. They claim that Part D plans pay more for many drugs than do other government programs such as Medicaid and the VA. Waxman's House Oversight and Government Reform Committee unveiled a study in May 2007 indicating that PDP prices for the most-prescribed brand-name medicines had jumped almost 7% from 2006 to 2007, much more than inflation. Waxman's investigators are looking for more evidence of Medicare overpayments for drugs in reams of Part D rebate data demanded from the top 12 plan sponsors. The VA and other public health programs are concerned that policy changes might undermine their price advantages, just as manufacturers and PDP sponsors fear that public disclosure of specific prices will compromise formulary negotiations.


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