Proposed Changes to Drug Rebates Could Harm Medicare Prescription Drug Coverage

Posted by: Daniella Chambers

Better Medicare Alliance advocates for the 22 million Americans who rely on Medicare Advantage for its affordability, simplicity, care coordination and enhanced supplemental benefits. Across the country rising costs of prescription drugs are a growing concern, as more and more individuals and families find it difficult to afford medications they need. Yet Medicare Advantage Prescription Drug plans (MA-PD) have been able to offer stable premiums to beneficiaries since the program’s inception.

Medicare Advantage-Part D plans work to deliver value for seniors and for taxpayers by negotiating lower prices directly with pharmaceutical companies. They do this by working with Pharmacy Benefits Managers (PBMs), such as CVS Caremark or Express Scripts, who negotiate lower drug prices with pharmaceutical companies through the use of rebates. Rebates are a vital tool used by health plans and PBMs to negotiate lower drug prices with drug manufacturers. Without this tool MA-PD enrollees could face increased premiums, higher out-of-pocket costs and reduced supplemental benefits.

Recently, the Administration proposed eliminating current rebates provided to PBM’s associated with Medicare Part D plans. The Senate Finance Committee hearing “Drug Pricing in America: A Prescription for Change, Part III” on April 9, 2019, provided lawmakers an opportunity to learn more about the role of PBM’s and better assess the impact of the Administration’s proposed changes to Part D prescription drug coverage.

Top executives from Cigna Corporation, CVS Caremark, Humana Inc., OptumRx, and Prime Therapeutics LLC answered questions about their efforts to curb the rising costs of prescription drugs, relationships with manufacturers, and the extent to which rebates impact list prices.

In summary remarks, Senator Sherrod Brown (D-OH) clarified “PBM’s do not set drug prices. The Administration rule will not change that fact.”
Better Medicare Alliance is opposed to the Administration’s proposal because it could jeopardize affordable prescription drug coverage and raise costs in Medicare Advantage plans.
Here’s why:

  • Rebates are important negotiating tool to compel drug manufacturers to keep prescription drug coverage affordable for seniors.
  • Part D rebates have been used to stabilize and drive prescription drug costs down.
  • Eliminating rebates could destabilize Medicare Part D premiums and cause an increase in costs to enrollees.
  • The proposed rule risks creating instability for seniors on Medicare.
  • Studies show that rebates have reduced costs in Medicare Part D by nearly $35 billion in the last four years and had they been eliminated last year Part D premiums would have risen by 52 percent in 2018 alone.
  • Eliminating current rebates would negatively affect nearly 16 million people on Medicare Part D.
  • This proposal could reduce access to supplemental benefits in Medicare Advantage Part D plans, such as dental, vision, and hearing coverage.
  • According to experts, zero premium MA-PD plans could experience a 28% reduction in resources available to finance supplemental benefits. This could translate to an average annual $228 decrease in funding available per beneficiary for these plans to provide supplemental benefits. Individuals in rural areas would be the most negatively impacted by this proposal.
  • This proposal fails to address the root cause of high prescription drug costs. If we’re serious about addressing the real problem, we need to start with list prices that are set by drug manufacturers.

Better Medicare Alliance supports the goal to curb rising prescription drug costs, but the potential harm to seniors and individuals with disabilities this proposal could cause suggests there should be another way to achieve this goal. We urge the Administration to work with stakeholders like Better Medicare Alliance to identify solutions that minimize the negative consequences to beneficiaries in integrated MA-PD plans and address the root causes of high prescription drug prices for consumers.