Protecting the Medicare Part D Program from Harmful Changes

Current Threats

Repealing the Non-Interference Clause

Included in the Medicare Part D program is a provision known as the non-interference (NI) clause, which prohibits the Secretary of Health and Human Services (HHS) from interfering in private negotiations between Part D plans, pharmacies and pharmaceutical manufacturers, or requiring a particular formulary or price structure (i.e., list of covered drugs) for the Part D program. 

Currently, insurers and manufacturers privately negotiate within the Part D marketplace to produce substantial discounts and rebates. Preventing government interference fosters competition among plans and helps create savings for both seniors and the government. Still, policymakers believe the government can negotiate better prices than the current marketplace structure and legislation has been introduced to repeal the NI provision. Unfortunately, these proposed bills could lead to limited patient choice and restricted access to care, potentially increasing Medicare costs long term. 

The Congressional Budget Office (CBO) has repeatedly said allowing the government to negotiate drug prices would have a negligible impact on federal spending unless HHS were to also limit access to prescription medications. Restricted access to affordable prescriptions means patients may not receive the medicines they need in order to improve health outcomes and avoid costly emergency room visits and hospitalizations. This access restriction would not only impact health outcomes, but could also lead to higher spending for other Medicare services. 

Changes to Part D’s Six Protected Classes

A recently proposed rule from the Centers for Medicaid & Medicare Services (CMS) would severely limit access to drugs that fall under the program’s six protected classes policy and could restrict access to new drugs in the protected classes that come to market. Under Part D, plans are required to cover “all or substantially all” drugs that fall within six classes of medication with some limited exemptions. These six protected therapeutic classes cover serious and often life-threatening, chronic conditions, including treatments for cancer (antineoplastics), HIV/AIDS (antiretrovirals), transplants (immunosuppressants), epilepsy (anticonvulsants) and mental health disorders (antipsychotics; antidepressants). 

The proposed rule would create new and extensive exemptions to the six protected classes policy for Part D plans, including the ability to refuse to cover new formulations of protected drugs. More exemptions mean more restrictive formularies that could diminish access to new, potentially more effective medication options. Additionally, the proposed rule would allow prior authorization or step therapy for all six protected classes, including for patients already stable on a six protected classes medicines, potentially disrupting patients’ current treatment plans. 

Patients depending on protected class drugs often have specific needs that require specialized care and access to a variety of existing and newly developed medications. Changes to the six protected classes policy must take into account these specialized needs and avoid one-size-fits-all approaches that limit access to these vital drugs.

Compulsory Licensing

Recently, legislation was introduced that would allow the government to grant compulsory licenses to generic drug manufacturers for Part D prescription drugs. Put simply, compulsory licenses allow a company other than the patent holder to make, sell or import a drug without the permission of the patent holder.

This bill or any future proposal that permits compulsory licensing could significantly impact the wide-raging access to medications that Part D currently provides. Allowing the government to interfere with crucial patent protections undermines Part D’s competitive marketplace structure and could lead to a halt in production of certain brand name drugs as demand decreases. In addition to reducing access to drugs currently in the market, compulsory licensing could stifle investment in research and development efforts, limiting patient access to new and innovative medications in the future. 

TrOOP Changes

Once a beneficiaries’ true out-of-pocket costs (TrOOP) reach a certain threshold, beneficiaries move from the coverage gap (or “donut-hole”) and into the catastrophic coverage phase of the Part D benefit. In the catastrophic phase, beneficiaries are responsible for 5 percent of their medicines costs. 

In an effort to close the coverage gap, the Affordable Care Act mandated that drug manufacturers offer substantial discounts to beneficiaries in the coverage gap. These discounts would be applied toward beneficiaries’ true out-of-pocket costs (TrOOP) to help them move out of the coverage gap faster. 

In the President’s FY2019 budget, the Administration included language to exclude these manufacturer discounts from Part D beneficiaries’ TrOOP spending. This change could have a severe impact on beneficiary health. If beneficiaries cannot count the discounts toward their overall spending, many of them will be in the donut hole longer and subject to higher out of pocket spending until they incur enough costs to enter the catastrophic phase. Seniors and individuals with disabilities reliant on Part D drugs often have multiple chronic conditions and already face the highest drug costs. Eliminating manufacturer discounts from TrOOP only increases many beneficiaries’ financial burden and could lead fewer beneficiaries receiving the prescriptions they need.