2016 Fall Newsletter- 2017 Medicare Part D Prescription Drug Plan Trends

Starting in 2017, there will be 41 million beneficiaries enrolled in Medicare Part D plans.  About 60% of these beneficiaries are enrolled in stand-alone prescription drug plans (PDPs), while the remaining 40% are in Medicare Advantage plans (MA-PDs).  Although the total number of Part D beneficiaries has not substantially changed since 2016, the premiums and deductibles imposed on these beneficiaries is increasing, and plan choices are decreasing.

In the last ten years, PDP premiums have increased over 60%.  The weighted average monthly premiums for PDP plan members are expected to rise by 9% from 2016 to 2017.  This will make the average monthly PDP premium $42.17 (excluding low-income subsidy adjustments), with wide variations from around $17 per month to over $70 per month, based on the plan.  One-third of PDP enrollees do not pay any premiums because of low-income subsidy (LIS) benefits.  The Kaiser Family Foundation projects the 2017 monthly premium distribution to be as follows.

premium-chart

In addition to premium increases, deductibles are expected to rise by 7% in 2017.  Meanwhile, the monthly Social Security benefits will see a 0.3% cost-of-living adjustment.  For senior citizens on a fixed income, these large Medicare premium and deductible increases could severely strain finances for many.

Shifts in cost-sharing for out-of-pocket expenses are also taking place.  Almost all PDPs have five cost-sharing tiers, with two generic tiers, two brand tiers, and one specialty tier.  Although percentage-based coinsurances have been popular for the specialty tier for many years, many non-preferred brand tiers are now implementing coinsurances vs. flat-dollar copays.  In 2017, the threshold for a specialty drug will also increase to $670 for a one-month drug supply.  This limit designates many injectable, high-touch products as specialty drugs.  However, several oral drugs often thought of as retail products may hit this threshold and fall into the specialty tier, including Absorica, Fycompa, Januvia, Latuda, Nucynta ER, Opana ER, and Saphris.  Manufacturers setting or increasing drug pricing should be conscious of this specialty threshold, as patient pay and pharmacy reimbursement amounts can be greatly impacted.

To promote use of lower cost generics, approximately one-third of PDPs have implemented a $0 copay preferred generic tier.  Compared to the models of the past decade, this formulary change shifts more of the costs for non-preferred brands to the patients.  It incentivize them to curtail the use of high-cost medications, when lower cost, equally efficacious options are available.

The average Medicare Part D enrollee had a choice of 22 PDPs in 2017.  Based on the state in which they reside, this number varied from 18 to 24.  Although this is still an acceptable number of choices, it is the lowest number of options since Part D was implemented in 2006.  This decrease is likely caused by several factors, including industry consolidation.

As 2017 approaches, PHSI recommends that pharmacists prepare to discuss increasing costs with patients who may be surprised when their prescription costs change.  Manufacturers should monitor their products’ tier placement and evaluate if any significant copay/coinsurance changes will affect their business.  2017 promises to be an interesting year for healthcare, so stay tuned for more updates in our coming newsletters.

 

2016 Fall Newsletter – Drug Exclusion Lists 2017 Update Article