PhRMA Deal to Improve Access to Brand Name Drugs in Medicare Part D Coverage Gap

On June 20, 2009, President Obama, Senator Baucus (D-MT), Chairman of the Senate Finance Committee, and the Pharmaceutical Research and Manufacturers of America (PhRMA) announced a proposal to improve access to brand-name prescription drugs for Medicare beneficiaries within their Part D Plan’s coverage gap. Specifically, PhRMA’s members would provide “to most beneficiaries” a 50 percent discount on brand-name prescription drugs covered by a Medicare beneficiary’s Part D Plan and purchased while the individual is within the plan’s coverage gap. The arrangement also would provide for the entire negotiated price of the medication to count towards the beneficiary’s true out-of-pocket (TrOOP) costs. Although the details of how such a proposal would be implemented (including the effects on Part D Plan Sponsors and their data collection and reporting requirements) have not yet been released, PhRMA’s announcement notes its members are expected to incur costs approximating $80 billion over 10 years in support of this arrangement.

House Bill Proposes to Eliminate Medicare Part D Coverage Gap, Among Other Changes

The House Bill proposed by Democrats in June 2009 also would modify the Part D coverage gap. Beginning with the CY 2011 benefit year, the Secretary would be instructed to progressively increase the initial coverage limit and decrease the catastrophic coverage threshold until the coverage gap is eliminated. The proposed phase-out would be complete by CY 2023.

In addition to several changes to the Medicare Advantage (MA) Program that would apply to the Medicare Part D Program by its incorporation by reference of certain MA statutes, the House Bill also proposes specific Medicare Part D Program changes, including the following:

Pharmaceutical Rebates

The House Bill would require pharmaceutical manufacturers to provide drug rebates for certain Low-Income Subsidy (LIS) eligible individuals. Such rebates would be provided directly to the Secretary, as opposed to Part D Plan Sponsors. Rebate calculations, however, would be based upon drug utilization information submitted by Part D Plan Sponsors at the end of each rebate period, and Part D Plan Sponsors could face penalties of up to $10,000 for each day in which information is not submitted, and up to $100,000 in CMPs for each item of false information knowingly submitted to the Secretary.

LTC Pharmacy Claims

MIPPA added a new provision to the Social Security Act that requires Part D Plan Sponsors to provide long-term care (LTC) pharmacies with at least 30 days, but no more than 90 days, to submit claims for reimbursement. The House Bill would eliminate this provision in its entirety, and Part D Plan Sponsors would be dependent on contract negotiations (with LTC pharmacies and/or PBMs) to set any deadline for LTC pharmacy claims submissions. Note that the MIPPA provisions regarding prompt payment of pharmacy claims would remain unaffected, but would not apply to LTC pharmacy claims, based on the exception written into the current statute.

TrOOP Costs

The House Bill would expand the group of prescription drugs costs that are eligible to be counted as TrOOP costs to include costs incurred in connection with participation in an AIDS Drug Assistance Program.

Mid-Year Plan Changes

The House Bill also would permit Medicare beneficiaries to change Part D Plans in the middle of a benefit year if the individual has been prescribed a Part D drug covered under the Part D Plan’s formulary and the formulary subsequently is “materially changed…to reduce the coverage (or increase the cost-sharing)” of the drug.

Such a provision would have obvious ramifications for Part D Plan Sponsors’ ability to modify their formularies in the middle of a benefit year, as is permitted under current regulations (subject to certain requirements, such as 60 days notice). The House Bill, however, also would effectively create a new special enrollment period for Medicare beneficiaries, requiring Part D Plan Sponsors to develop additional mechanisms to track individuals who use this formulary change as a basis for switching Part D Plans in the middle of the benefit year (as well as to track such individuals’ TrOOP costs, etc.).