Without question, the Medicare Part D prescription drug program passed by Congress in 2003 has been an unqualified success. Not only are seniors very satisfied with the program – the program consistently achieves beneficiary satisfaction rates of 90% or higher – Medicare Part D has also cost billions less than forecast.
So far the program has achieved cost savings that are 45% below original projections. And while the Medicare Trustees in 2004 projected that the average Part D premium would be $61 in 2013, premiums have instead remained relatively flat at $30 on average.
Unfortunately, one of the key elements of Part D’s success – the use of “preferred pharmacy networks” – is under threat.
A recent proposal from the Center for Medicare & Medicaid Services (CMS) would have effectively eliminated these popular low-cost Part D plans, which are now the choice of almost 75% of Part D plan beneficiaries.
Medicare Part D beneficiaries have demonstrated that they value having a choice of Part D plans, and that they want plans that offer affordable and convenient access to prescription drugs. One way that Part D plans control costs is through the use of preferred pharmacy networks, which offer lower drug prices to beneficiaries. The Part D sponsor is able to do this when it negotiates more competitive pharmacy contract terms on prescription drug prices with pharmacies willing to accept lower reimbursement in exchange for increased volume. Preferred network pharmacies offer low, or even no, beneficiary cost sharing on certain drugs and Part D plans that partner with preferred pharmacies have premiums as low as $12.60/month in some parts of the country compared with $30 on average for all Part D plans.
Approximately 75% of all beneficiaries in stand-alone Part D plans have voluntarily enrolled in a plan with preferred pharmacy networks. The “preferred” pharmacies vary by plan but typically include a combination of grocery store pharmacies, big box pharmacies (Walmart, Target, Costco, etc.), chain drug stores as well as independent pharmacies. Enrollees in the preferred network plans can go to any pharmacy of their choice and yet take advantage of the lower “preferred” pharmacy network plan premium. If the enrollee wants to save even more money, she can chose to fill her prescriptions at a preferred network pharmacy. If enrollees in a preferred pharmacy network plan opt to go to a pharmacy that is not preferred, the difference in their cost sharing is limited by regulation to a few dollars more per prescription, but it is their choice and is offset by their lower premium.
Research shows that Medicare drug plans using such preferred pharmacy networks today have lower average premiums and the same or better average quality ratings as plans without preferred networks, according to Avalere Health. A recent study by Milliman estimated that preferred pharmacy network plans will reduce federal Medicare spending by $7.9 billion to $9.3 billion over the next 10 years. Milliman found that the largest two-year decrease in federal direct subsidies in the history of the Part D program has coincided with the rapid adoption of preferred pharmacy network plans and the increased use of generic drugs. What’s more, Part D seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs, convenient access to pharmacies and other benefits, according to a survey from Hart Research Associates.
The rules proposed by CMS, however, would risk this success. As proposed, the CMS rules would have ended the ability of Part D plans to negotiate favorable contracting terms with retail pharmacies by imposing an “any willing pharmacy” policy and price supports on plan reimbursements to pharmacies.
As a starting point, this proposal is in direct violation of the Medicare Modernization Act of 2003, which expressly forbids any “interference” by the government in such negotiations. More significantly, however, these proposals would increase costs for beneficiaries and taxpayers alike.
CMS argues that requiring plans to post publicly their proprietary terms and conditions and then allowing any willing pharmacy to meet them would “promote increased price competition among network pharmacies.” The Federal Trade Commission (FTC), however, has repeatedly concluded that regulatory interference with contractual terms likely will result in increased prices. In fact, the FTC specifically concluded that any-willing-pharmacy requirements “can … undermine the ability of plans to reduce costs. This is likely to result in higher negotiated prices, ultimately harming consumers.”
Further, actuaries from Oliver Wyman estimate that eliminating preferred pharmacy networks in Part D would, over 10 years, result in an added $990 in premiums per affected enrollee, and an added cost to the government of approximately $24 billion. In 2015 alone, the estimated average increase in premiums for the affected population would be $63 per year, with an average of $80 to $100 per year in additional cost-sharing in 2015.
Eliminating preferred pharmacy networks undercuts not only the ability of plans to control costs, but also to deliver quality. Such proposals will make it much harder for plans to either exclude pharmacies at high risk for fraud, waste, and abuse or reward higher quality pharmacies.
Part D has been a very successful program, with the use of preferred pharmacy networks contributing significantly to that success. To bar their use is to risk that success and would only hurt beneficiaries.
Medicare’s Prescription Drug Benefit Program (Part D) is governed by a broad set of rules to ensure that Medicare beneficiaries get the drugs they need. Early in the program’s implementation, CMS recognized the need to establish certain patient protections. These protections have proved essential for ensuring access to prescription drugs, especially given that Part D is administered by private plans with extensive experience managing drug costs through advanced formulary and utilization management techniques. The MAPRx Coalition has advocated for Part D patient protections for more than ten years.
Earlier this year, a misguided proposal by the Centers for Medicare and Medicaid Services (CMS) led to a vigorous debate about access to prescription drugs in the Medicare Part D program. This debate underscored the need for Part D consumer protections and brought a focus on needed improvements for the Part D appeals process.
Among the many changes put forth by CMS was a proposal to severely narrow the scope of “six protected classes” of prescription medication available to patients, also referred to as “classes of clinical concern.”
The “protected classes” policy is one of many patient protections devised and implemented by CMS. The policy requires formularies to include “all or substantially all” drugs from six protected classes: anticonvulsants, antidepressants, antipsychotics, antiretrovirals, and immunosuppressants. This policy helps to ensure that Part D formularies meet the needs of Medicare beneficiaries, and also helps to ensure timely access. In addition, the policy addresses the potential for discrimination so that beneficiaries with chronic conditions (and reliant upon drugs in classes of clinical concern) are not discouraged from enrolling in Part D plans.
Unfortunately, CMS proposed eliminating two of the six protected classes, the antidepressant and immunosuppressant drug classes, in 2015 and the antipsychotic drug class beginning in 2016, which would have severely limited access to vital medications. The Lupus Foundation of America, along with the Medicare Access for Patients Rx (MAPRx) Coalition and many others, vigorously fought against the proposal until CMS put its proposed rules on hold in March.
The six protected class policy has been a safety net for some of the most medically fragile Medicare beneficiaries because it requires plans to cover “all or substantially all drugs” for these six critical lifesaving drug classes. It has successfully protected basic access for patients who need non-interchangeable medications to treat and manage serious and often life-threatening conditions, such as epilepsy. This policy has been a weapon against discriminatory plan design and a true protective measure for patient access to physician directed care. Many organizations, including the Lupus Foundation of America, have championed this policy as model guidance for all health insurance formulary designs.
The vital beneficiary protection offered by the protected class policy also provides stability for beneficiaries with serious, chronic medical conditions and often protects those with more than one condition. The MAPRx Coalition and many others strongly disagreed with CMS’ application of the protected class policy to “typical individuals” as adequate justification for the proposed changes. This narrow application ignored the fact that Medicare beneficiaries taking medications under the protected classes are anything but “typical individuals.” They are Medicare beneficiaries living with multiple, complex chronic conditions, significant disabilities, or complicated co-morbidities. CMS ignored the complexity of both physical and mental care required for these beneficiaries in its proposal to remove antidepressants, immuno-suppressants, and antipsychotics from the protected classes of medication.
In addition, CMS based the proposed changes on a flawed set of assumptions about current Part D beneficiary protections. For example, the CMS proposed rule states that beneficiaries can rely on a “robust coverage determination and appeals process.” The Part D appeals process is not a sufficient safeguard. Despite evidence suggesting the contrary, CMS asserts that the existing exceptions, appeals, and grievance processes will sufficiently enable timely access to necessary medication when access is restricted by formulary. CMS’ own recent audits demonstrate consistent failure by Part D plans to efficiently adjudicate the appeals and grievances processes. Additionally, a recent Medicare Payment Advisory Commission (MedPAC) analysis found that most beneficiaries are unaware of how the exceptions and appeals process works, further reinforcing our concern that current appeals processes cannot be relied on to ensure beneficiary access to previously protected classes.
For the vulnerable individuals who rely on therapies in the six protected classes, it is essential that physicians be able to prescribe the medications that are best for the patient. Access to physician-directed care should be based on independent clinical judgment, and Medicare Part D should cover prescribed medications. Limiting access to the most appropriate medications will lead to higher overall costs to the Medicare program, including higher out-of-pocket costs for beneficiaries and increased costs in Medicare Part A and Part B and Medicaid. These higher costs are due to the destabilization of patients’ conditions, and increased physician visits and hospitalizations. The six protected classes must be maintained and strengthened, and CMS should immediately address the problems in the Part D appeals process.
The Lupus Foundation of America is a member the MAPRx Coalition, which brings together more than 55 patient, beneficiary, family caregiver and health professional organizations committed to improving access to prescription medications and safeguarding the well-being of beneficiaries with chronic diseases and disabilities under the Medicare prescription drug benefit (Part D).
When the Centers for Medicare and Medicaid Services (CMS) published proposed regulations that would make significant changes to the Medicare Part D prescription drug program, the Healthcare Leadership Council (HLC) – a coalition of chief executives from all sectors of American healthcare – made a somewhat unorthodox decision. Rather than submit comments to CMS detailing suggested changes to the proposed rule, HLC instead called on the agency to withdraw the rule in its entirety. Nearly 400 organizations representing patients, healthcare providers and manufacturers, employers, individuals with disabilities and other organizations signed a letter supporting this approach.
To understand why HLC, and its allies on this issue, took this stand, one has to understand the role Medicare Part D plays in the nation’s healthcare fabric and why the program has been such an undeniable success since its inception.
Medicare Part D has achieved a status, in at least a couple of important respects, that places it apart from other federal programs. First, virtually no one complains about their prescription drug benefit. Just the opposite, in fact. Annual surveys conducted by the Medicare Today coalition and KRC Research show that senior citizen approval for Part D is consistently in the upper 80s, sometimes reaching 90 percent. That’s virtually unheard of for any kind of government-administered program. People say, in high numbers, that they are receiving high-quality coverage for a very reasonable price.
That soaring public approval is due, in no small part, to Medicare Part D’s other noteworthy achievement – maintaining affordability for both beneficiaries and taxpayers. Average premium costs have stayed at approximately the same level for three consecutive years now, and program costs overall are still at more than 40 percent below what the Congressional Budget Office projected when Part D was created.
These successes must be credited to an aspect of Medicare Part D that was, at one time, controversial, but is now accepted as an integral part of the program’s DNA. It can’t be changed or removed without fundamentally altering the character of the program itself. Medicare Part D works because plans compete with each other on the playing field of cost, quality and value. Beneficiaries in every state have multiple plans from which to choose, and hand-wringing that seniors would be confused by having all these choices has proven unfounded. In fact, the KRC Research survey shows that a vast majority of the over-65 population demands these competing plan options. Moreover, seniors’ power as consumers has kept coverage affordable.
Congress has proved wise in determining that price negotiations for pharmaceuticals in Part D should be left in the hands of health plans, pharmaceutical benefit managers and pharmacies, without government interference. The proof is in the proverbial pudding. Private sector price negotiations have succeeded in protecting value and affordability for consumers as well as savings for taxpayers.
Given all of this as a backdrop, HLC found it necessary to call for the withdrawal of the CMS regulation rather than dissect its pros and cons. The fact is, the proposed rule as constructed would have been disruptive to the essence of what makes Part D work.
Why, for example, limit the number of health plans a plan sponsor can offer in a particular region when seniors have made it clear they value choice, and when competition has been the driving element in keeping drug costs affordable? Why interject government involvement in price negotiations between pharmacies and Part D plans, when Congress clearly rejected the notion of federal engagement and when private sector negotiations have worked quite well? (In fact, the entire premise of making it more difficult for plans to work with pharmacies that are willing to offer price discounts in exchange for higher customer volume is, oddly, an anti-consumer direction for a federal agency to recommend.)
And why place new restrictions on access to therapies for some of Medicare’s most health-challenged patients when the best way to contain long-term costs is to keep these individuals healthy?
We applauded the decision of CMS Administrator Marilyn Tavenner to refrain from pursuing much of the proposed rule. It was the right thing to do for beneficiaries, for taxpayers and for the Medicare program as a whole.
We still need to be vigilant, though, regarding ill-conceived alterations to one of the most successful initiatives government has ever created. There are still proposals bouncing around to bring, in essence, federal price controls into Part D or empower the government to take a seat at the price negotiating table. There is no question we need to continue evaluating and improving Part D to make an even better program for the millions who depend upon it, but to put a slightly different twist on an old saying, let’s not break what clearly doesn’t need major fixing.
Health care providers generally take some form of the Hippocratic Oath where they recite the famous phrase, “first, do no harm” upon setting out to care for patients. It’s a shame that the decision-makers who set health care policy occasionally fail to meet that simple standard. An unfortunate example has been the Centers for Medicare and Medicaid Services’ (CMS) policies regarding exclusionary “preferred pharmacy” plans in the Medicare Part D prescription drug program. Despite statutory language to the contrary, CMS has historically approved these plans. More recently, CMS proposed revising this misguided approach with a more reasonable solution, but when faced with political pressure, retreated to the unacceptable status quo, at least for now.
Issues related to exclusionary pharmacy networks began in 2010 when Walmart and Humana announced the offering of a “preferred pharmacy” plan for Medicare Part D, one that heavily marketed attractive premiums and co-pays but glossed over the fine print. Under this plan, beneficiaries pay more if they do not use the “preferred” Walmart pharmacies. The plan did not even offer other pharmacies the opportunity to participate in the network under the same terms and conditions. CMS not only approved this initial arrangement, but allowed other large insurance companies to offer preferred pharmacy plans that only included national pharmacy chains.
All too often seniors unwittingly choose these aggressively — and often deceptively — marketed plans. Lured by the promise of savings (which do not necessarily materialize), beneficiaries are often surprised to learn that using their community pharmacy of choice may no longer be a viable option due to higher co-pays imposed by the plan. In rural areas, beneficiaries may face a 20 mile trip to reach the plan’s designated “preferred” pharmacy (likely passing several community pharmacies along the way). Making matters worse, in approximately 1,800 rural communities, independent community pharmacies — which are rarely invited or allowed to be part of preferred plans — are the sole pharmacy provider.
CMS attempted to rectify this anti-competitive, anti-patient injustice by ensuring that the “any willing provider” provision already in the law also applies to preferred pharmacy networks in its proposed rule for 2015 Medicare Part D drug plans. If, for example, an independent community pharmacy is willing to accept preferred pharmacy contract terms and conditions, under CMS’ proposal the pharmacy would be afforded the opportunity to participate. Since independent community pharmacies consistently rate highly in surveys, this was a welcome development for seniors. Many consumer-focused groups also supported this common-sense change such as the National Consumer League, the Service Employees International Union (SEIU), the American Federation of State, County and Municipal Employees, and U.S. PIRG. In addition, significant bipartisan support exists in the U.S. House of Representatives, where 28 members organized by Representatives Morgan Griffith (R-Va.) and Peter Welch (D-Vt.) signed a letter to CMS about this issue.
Unfortunately, a political fight ensued that mostly centered on an unrelated provision easing the requirements that Part D plans cover certain “protected classes” of prescription drugs. CMS in the face of the pressure was actually urged to withdraw the entire rule and start from scratch. After the comment period on the prosed rule closed, CMS decided to not more forward with many components of the proposed rule. Regrettably the “any willing provider” provision became collateral damage as it was set aside for the time being.
Now the strategy will include the continued pursuit of a regulatory fix and the quest for legislative fix. Consumers concerned about these exclusionary preferred pharmacy networks should go to www.Fight4Rx.org to get involved. Independent community pharmacists will continue to keep the pressure up, not only for the sake of our profession, but most importantly for the millions of seniors who rely upon us for their prescription drug services.