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Changes to Medicare Prescription Drug Prices


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In November 2018, the Trump Administration published a proposal that could lower Medicare prescription drug prices, CNBC reported. Here’s what you need to know if you have Medicare prescription drug coverage under Medicare Part D.

The proposal could affect you if you have Medicare Part D coverage if it gets approved. The Trump Administration continues to call for Congress to pass laws to reduce the spiraling cost of prescription drugs under Medicare Part D. In November, 2018, the Centers for Medicare & Medicaid Services (CMS) proposed new rules for 2020. These rules may strengthen negotiating power for Medicare prescription drug plans. They may be able to get drug manufacturers to lower certain prescription drug costs.

What does this mean to you and others who have Medicare Part D prescription drug coverage? Whether your prescription drug prices will be lower remains to be seen. Some changes to watch for include:

  • Prescription drug prices that are easier to understand. You may be able to see the list price of each Medicare prescription drug, the Medicare Part D plan’s negotiated discount, and any better discount available to you.
  • Lower drug pricing –and lower out-of-pocket costs–on certain high-cost Medicare prescription drugs
  • Certain generic Medicare prescription drugs available at no cost for low-income people with Medicare Part D coverage

But there are likely to be trade-offs, the New York Times reported. Experts say some of these may include:

  • Higher Medicare Part D premiums as the industry adjusts to new drug pricing strategies
  • Fewer choices among covered Medicare prescription drugs within a drug class
  • More drug utilization management controls to ensure Medicare prescription drugs are cost-efficient and clinically effective

How does the government propose to lower drug prices?

The Trump Administration proposes a number of strategies for lowering drug prices. Several of these are summarized below.

  1. Share drug manufacturers’ rebates with Medicare Part D enrollees. Currently, Medicare Part D plans utilize pharmacy benefit managers to negotiate discounts on certain prescription drugs with drug manufacturers. In exchange for placing these drugs on the preferred drug formulary, the manufacturer provides rebates. The rebates are shared between the pharmacy benefit manager and the Part D plan. The proposal would require Part D plans to pass on at least one-third of total rebates and price concessions to enrollees at the point of sale.

If this drug pricing proposal were adopted, it would produce immediate savings to people who take these Medicare prescription drugs because they would have lower out-of-pocket costs on these specific prescription drugs. However, the change could also lead to higher Part D premiums for all Medicare beneficiaries over time because Part D plans would have revenue to use toward keeping plan costs down.

  1. Relax Part D formulary standards. Medicare prescription drug plans must cover a minimum of two drugs per drug category or class, and to cover drugs in six protected classes. Some Medicare prescription drug plans argue this rule limits their ability to negotiate with drug manufacturers because it makes it hard to drop a Medicare prescription drug if they aren’t satisfied with the drug pricing terms or if the medication doesn’t work better than existing treatments that cost less.

The Administration’s proposal would loosen Part D plan formulary standards by requiring plans to cover a minimum of just one drug per category or class. Further, the proposal expands plans’ ability to use utilization management tools for specialty drugs and drugs in the protected classes. This could result in fewer choices in covered brand prescriptions to treat some conditions. It also might mean more prescription drugs may require prior authorization or step therapy.

  1. Eliminate cost sharing for generic Medicare prescription drugs for low-income Medicare enrollees. Under the current Medicare program, low-income Medicare beneficiaries can get brand and generic prescription drugs at a reduced cost because of government subsidies. The Trump Administration proposal might give covered Medicare generic prescription drugs free of charge to people who earn less than 130 percent of the federal poverty level.

If implemented, this proposal would have an immediate savings to low-income Medicare beneficiaries who are prescribed these generic medications.

  1. End Pharmacist “Gag Clauses”. This law is meant to make prescription drug prices easier for consumers to understand. Before this law was passed, pharmacists were often bound by “gag clauses” in contracts with pharmacy benefit managers. These gag clauses restrained them from telling consumers if their prescription drug would cost them less with insurance than without insurance. Pharmacists could share this information if asked by the consumer but they could not voluntarily provide it. Today they can, and in doing so they provide Medicare beneficiaries valuable information about prescription drug prices before the prescription is filled and paid for.

What should you do?

You might want to watch the news as these changes roll out (or get voted down). The Washington Post reported that Medicare prescription drug plan premium hikes might not be seen until the 2020-2021 timeframe.

It’s easy to compare Medicare prescription drug plans. Using eHealth’s enrollment tool, you can enter your prescription drugs to narrow down your search to those plans that may cover your medications.

Just enter your zip code in the box on this page to get started. Of course, you can reach out to a licensed eHealth insurance agent with any questions you have.

While there has been discussion about loosening the regulation over essential health benefits, this article is only meant for general education, and may not be updated after publication.

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