Continued Affordability Challenges in the Offing

Publication
Article
Pharmaceutical CommercePharmaceutical Commerce - December 2023
Volume 18
Issue 6

Will result from Medicare reforms, despite increased drug uptake.

Left: Kevin L. Hagan, president and CEO, PAN Foundation

Right: Amy Niles, chief advocacy and engagement officer, PAN Foundation

Left: Kevin L. Hagan, president and CEO, PAN Foundation

Right: Amy Niles, chief advocacy and engagement officer, PAN Foundation

Effective Jan. 1, 2024, individuals with Medicare Part D coverage may start to see their out-of-pocket (OOP) costs for prescription medications decline. This is a result of a Medicare reform, enacted through the Inflation Reduction Act, that eliminates 5% cost-sharing in the catastrophic phase of one’s benefit. With this reform, OOP costs should be limited to about $3,250 for the calendar year. Further patient-centric reforms take place Jan. 1, 2025, when a $2,000 Part D cap on OOP costs for prescription medications will go into effect, coupled with the opportunity to enroll in the “Medicare Prescription Payment Plan” that will enable these costs to be distributed across the calendar year.

In late 2022, the PAN Foundation commissioned research by Avalere, a healthcare consulting firm, to examine the projected beneficiary utilization and spending by Medicare Part D beneficiaries under the new reforms. The analysis found:

  • More than 2.6 million non-low-income subsidy Medicare Part D beneficiaries will have OOP spending high enough to reach the new $2,000 annual OOP cap on prescription drugs in 2025.
  • Additionally, about 800,000 beneficiaries in 2024 and more than 200,000 in 2025 will spend more than 10% of their income on Rx each year.

A higher share of beneficiaries who qualify for Medicare based on disability, as well as greater shares of Hispanic and Black beneficiaries, will have high spending levels early in the calendar year. Building upon this research, a new study from Avalere explores the potential impact these reforms could have on non-low-income subsidy patients taking drugs within eight therapeutic areas (TAs). These include autoimmune diseases, HIV, and multiple sclerosis (MS). Avalere assumed conservative or low-level estimates of beneficiary utilization and plan formulary management responses. Select findings are presented here:

1. More patients will be able to start and stay on prescription drugs.

Following implementation of the Medicare reforms, Avalere projects that the number of 30-day prescriptions for drugs within the TAs studied to increase between 1% and 10%.

2. Patients in TAs studied will reach the annual cap of $2,000 in a conservative scenario.

While the Medicare reforms are expected to lower OOP costs for Rx for non-low-income subsidiary beneficiaries across the TAs, most patients taking medications for an autoimmune condition, HIV, and MS will have spending of more than $1,750 in 2025. In a situation where beneficiary use and plan formulary management responses are increased, OOP costs may increase for beneficiaries.

3. About 135,000 patients across the eight TAs analyzed will spend more than 10% of their income on OOP costs, leaving them underinsured. These individuals will be at increased risk of delaying or forgoing treatment. In a medium-response scenario, this number could increase to 365,000 beneficiaries. These affordability challenges are estimated to disproportionately affect patients with incomes between 150% and 300% of the federal poverty level.

The analysis illustrates that in particular, individuals living with autoimmune conditions, HIV, and MS are projected to spend more than 10% of their income on drugs. For those on autoimmune therapy, the analysis points to the outsized affordability challenges that historically marginalized and underserved patient populations will continue to face.

4. Affordability challenges will continue to be faced by those with high OOP costs late in the calendar year.

These individuals will not fully benefit from the Medicare Prescription Payment Plan, as they will be unable to spread their costs across a large number of months.

5. Plan formulary response will impact patient behaviors.

It is not clear how plans will respond and adjust their formularies over time. Should plans implement higher response scenarios through formulary management, patients will be impacted more when it comes to access, affordability, and medication uptake and adherence.

About the Authors

Kevin L. Hagan is president and CEO and Amy Niles is chief advocacy and engagement officer, both at PAN Foundation.

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