Addressing Cancer Drug Costs in Medicare Part D

The current cost sharing structure of Medicare Part D leaves many cancer patients feeling an economic pinch. Most beneficiaries have no limit on out-of-pocket costs and those costs are often calculated as a percentage of the list price instead of fixed copays. A recent editorial published in JAMA Oncology1 addressed the concerns.

With new cancer treatments having out-of-pocket costs of more than $10,000 per year, per drug, costs can quickly add up. A subsidy program exists for low-income Medicare patients, but only around 25% of beneficiaries qualified for this assistance in 2021. By comparison, other programs such as the Affordable Care Act and Tricare have much lower caps at $8700 and $700, respectively. The Build Back Better Act, passed by the House in December 2021 (which also caps insulin costs at $35 per month), would limit the costs of these life-saving medications to $2000 per year.

However, capping costs alone would cause premiums and federal costs to increase. A plan to address the launch prince of drugs and future price increases is also needed. The 2019 Elijah E. Cummings Lower Drug Costs Now Act included a plan to not only cap costs at $2000, but to control drug pricing by comparing it to the drug prices in 6 comparable countries. Although the Build Back Better Act does address drug costs, it’s very limited, allowing for negotiation only for a small group of drugs that are near the end of exclusivity periods and does not impact launch pricing.

Patients’ out-of-pocket costs are based on the list price and any confidential rebate or discount is kept by Plan D plans to reduce premiums, rather than passed along to the patients. Final rules were issued in both the Trump and Biden administrations to limit rebates and/or other discounts. The Trump Administration rule only allowed rebates if they were passed through to the point-of-sale price. An analysis of the rule estimated that it would increase premiums and spending by $170 billion over a decade, which led to the rule’s implementation being delayed until 2027. A Biden Administration rule required concessions on pricing be passed along to point-of-sale prices. However, these rules likely won’t lead to meaningful change in out-of-pocket costs.

“To sustainably address rising prescription drug spending in the long-term, a cap on patients’ out-of-pocket costs must be coupled with policies addressing the total cost of prescription drugs,” the authors concluded.

Reference

1. Hwang TJ, Kesselheim AS, Dusetzina SB. Reforming patient cost sharing for cancer medications in medicare part D. JAMA Oncol. 2022 Oct 1;8(10):1398-1400. doi: 10.1001/jamaoncol.2022.2828.