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The Medicare Payment Advisory Commission (MedPAC) needs to work harder and faster on issues related to drug pricing in Medicare, Rep. Anna Eshoo (D-Calif.), chairwoman of the House Energy & Commerce Health Subcommittee, said Tuesday.

"I think we have our work cut out for us, but I think you do as well," Eshoo said to MedPAC executive director Jay Mathews, PhD, the lone witness at a hearing on the drug pricing topic, who was testifying before Congress for the first time. "I think MedPAC needs to step its game up in these areas and you [need to] do it in a timely fashion."

For the most part, Eshoo was gentle and complimentary toward Mathews, telling him he did well for his first time out and pointing out that the hearing room was smaller and cozier than some of the others he could have ended up in. But she also encouraged MedPAC to increase its intensity.

"I would encourage MedPAC to go back and continue to make recommendations on how to protect patient access," Eshoo said. "This is not just a program where numbers are shifted around; the numbers apply to people, to human beings. I don't see how that element can be left out of your deliberations."

How the Plans Work

Mathews outlined the different ways in which Medicare pays for drugs, depending on which part of the program is involved. In the Medicare Part B program, which generally covers outpatient services and treatments, Medicare covers drugs administered by physicians in their offices, paying each physician the average sales price of the drug plus an additional 6% to cover office overhead costs (that percentage has been reduced to 4.3% for the last few years due to a government-wide budget cut known as sequestration).

Under that system, the higher the cost of the drug, the higher the payment to the provider who administers it, he noted. "The research is limited as to whether providers are acting on those incentives, but nonetheless the incentives are still there." Instead, MedPAC recommends that vendors negotiate drug prices with manufacturers and then pass on those prices to clinicians who prescribe drugs under Part B. Medicare would require that vendors negotiate prices no higher than 100% of the average sales price, as a way to avoid price increases.

Rep. Larry Bucshon, MD (R-Ind.), defended his fellow physicians. "As a physician, I'll say there automatically is an assumption that physicians out there would choose a higher-priced product to make more money [under Part B], but I'll push back on that and say maybe there are people who would do that, but I'd argue that the vast majority of physicians make decisions on which medications to use for patients based on clinical knowledge and standard of care in the community," he said.

In contrast to Part B, the Medicare Part D prescription drug benefit allows for patients to choose from a variety of privately administered prescription drug plans, each of which negotiates its own arrangements with pharmacies and with drug manufacturers, including any price rebates. Each plan submits a bid to participate in the Part D program, and the government pays successful bidders based on the bid price with an adjustment for the health of their enrollees.

The Donut Hole Problem

In both Parts B and D, enrollees pay a monthly premium plus copays and deductibles. Part D also includes a coverage gap -- sometimes called the "donut hole" -- under which beneficiaries' required copays increase from 25% to 35% of brand-name drug costs after the beneficiary and their Part D insurer have spent a total of $3,750 in a given year. Manufacturer discounts currently take care of another 50% of the cost, and the insurer picks up the remaining 15% for beneficiaries in the donut hole (For generic drugs, the beneficiary pays 44% of the cost and the plan pays the remaining 56%).

Once the beneficiary spending and drug company discounts have reached a combined $5,100, the donut hole ends and the beneficiary goes into a "catastrophic coverage" period in which, under a standard plan, he or she pays only a 5% copay for any remaining drugs for the year, with the insurer paying 15% and the federal government paying 80%. In 2017, 370,000 beneficiaries filled a single prescription that pushed them right into catastrophic coverage, compared with 33,000 beneficiaries in 2010, Mathews noted in his opening statement.

And sometimes even that 5% is a real hardship, said committee member Rep. John Shimkus (R-Ill.). He talked about one constituent of his, a Medicare beneficiary who was prescribed an enzyme deficiency treatment that cost $348,000 per year. "It was our intent that once you came out of the donut hole, you'd be covered ... This [drug] is $22,000 a month, they're still on the hook for a percentage of that."

"We need to address this major expense; if Medicare D is supposed to be an insurance plan ... I would hope ... we would take [Mathews'] counsel and try to address this end of the process," Shimkus said. "We need to help [seniors] on the back end."

Concerns About Step Therapy

Several committee members expressed concerns about proposals by the Trump administration to allow Part D drug plans to initiate programs such as prior authorization and step therapy, in which a patient would have to try one or more lower-priced therapies and fail with those before he or she could get coverage for a higher-priced drug.

"While I understand step therapy can play an important role in reducing healthcare costs, it often doesn't take into account a patient's medical history, like whether they've tried the medication previously and failed under a different plan," said committee member Rep. Raul Ruiz, MD (D-Calif.). He noted that one of his constituents, a psoriasis and psoriatic arthritis patient, "is going through step therapy right now ... He has tried several therapies over the years. Despite the fact that he already tried one therapy that didn't work, he's currently being forced to go through a similar therapy his doctor knows won't be effective."

Ruiz has introduced a bill called the Safe Step Act, cosponsored by Rep. Brad Wenstrup (R-Ohio) which would create exceptions to allow patients to bypass step therapy if their physician knows the treatment won't be successful. He asked Mathews for safeguards for the administration to put in place to "protect patients from unnecessary, harmful treatments."

"The commission has gone on record as supporting plans getting more flexibility to use these management tools," Mathews replied. "We do understand that every patient is unique and wouldn't support putting patients through step therapy when the clinician knows they're not going to be effective for a given patient. Therefore, we have said the greater use of these tools has to be accompanied by a very robust and effective system of grievances and appeals whereby a clinician can request an expedited appeal" to show that the patient has already tried and failed a particular therapy.