Lower Prescription Drug Costs For Seniors Come From Biden Administration
Well, where did the second half of 2023 go? For OTL Benefits, Medicare Annual Enrollment Period (AEP) was very busy. This year, I spent a great deal of time helping clients deal with the cost of prescription drugs. Which prescriptions were costing Medicare enrollees the most? One way to answer that question is to review a list of drugs that cost Medicare the most money:
10 costliest Medicare Part D prescription drugs
Eliquis, a blood thinner, $12.6 billion
Revlimid, treats cancer, $5.9 billion
Xarelto, a blood thinner, $5.2 billion
Trulicity, treats diabetes, $4.7 billion
Januvia, treats diabetes, $4.1 billion
Jardiance, treats diabetes, $3.7 billion
Imbruvica, treats cancer, $3.2 billion
Humira (CF) Pen, treats rheumatoid arthritis, $2.9 billion
Lantus Solostar, treats diabetes, $2.8 billion
Ozempic, treats diabetes, $2.6 billion
The same drugs also drive up the out-of-pocket costs for Medicare enrollees. These drugs are usually Tier 3 under the Medicare prescription plan, and high costs typically hit consumers in three different ways:
Deductibles
High copays
Coverage Gap – If your drug costs and plan payments for 2023 reached $4660, you entered the coverage gap stage, aka “donut hole”. You then paid 25% for all covered drugs until your out-of-pocket costs for the year reached $7,400.
All of which takes us back to AEP. The market for prescription drug coverage was more chaotic than usual, with some carriers imposing 40-50% premium increases. I think that the last drug in the list above, Ozempic, and its market competitor, Wegovy, are affecting the insurers view of potential future costs. These are expensive drugs, and most plans are limiting coverage to individuals with a diagnosis of diabetes. However, these drugs do promote weight loss and may decrease the risk of cancer, diabetes and cardiovascular disease in individuals who are obese or overweight. As a result, there is tremendous demand for these drugs from people who do not have diabetes. This demand may force insurers to expand coverage of these drugs. Hence, an upward pressure on premiums.
Good News on Price Negotiations
For the first time, Medicare is negotiating the prices of prescription drugs. The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), recently announced the first 10 drugs covered under Medicare Part D selected for negotiation. The negotiations with participating drug companies started in 2023 and continue in 2024, and any negotiated prices will become effective beginning in 2026. Medicare enrollees taking the 10 drugs covered under Part D selected for negotiation paid a total of $3.4 billion in out-of-pocket costs in 2022 for these drugs.
The selected drug list for the first round of negotiation is:
Eliquis
Jardiance
Xarelto
Januvia
Farxiga
Entresto
Enbrel
Imbruvica
Stelara
Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill (insulins)
These selected drugs accounted for about 20% of total Part D gross covered prescription drug costs between June 1, 2022 and May 31, 2023, which is the time period used to determine which drugs were eligible for negotiation. CMS will publish any agreed-upon negotiated prices for the selected drugs by September 1, 2024; those prices will come into effect starting January 1, 2026. In future years, CMS will select for negotiation up to 15 more drugs covered under Part D for 2027, up to 15 more drugs for 2028 (including drugs covered under Part B and Part D), and up to 20 more drugs for each year after that.
So, our Federal government finally joins the vast majority of other countries that negotiate prices with the drug manufacturers.
Why has it taken so long? Bushels of money are spent by the drug manufacturers on both sides of the political fence!
Why now? The Biden administration recognized the impact of prescription costs on seniors and working families and decided to do something about it.
Good News on 2024 Medicare D Benefit Changes
2024 improvements implemented by the Biden administration include:
Elimination of the 5% coinsurance requirement in the catastrophic phase in 2024 means that Part D enrollees who use high-cost medications, such a cancer drugs, covered by Part D will see thousands of dollars in savings.
Three major insulin manufacturers have agreed to price their insulins at $35 per month.
More Good News on 2025 Medicare D Benefits Changes
Changes in 2025 include a new $2,000 out-of-pocket spending cap, elimination of the coverage gap phase and a higher share of drug costs paid by Part D plans in the catastrophic phase.
Beginning in 2025, Part D enrollees’ out-of-pocket drug costs will be capped at $2,000. This amount will be indexed to rise each year after 2025 at the rate of growth in per capita Part D costs. (This cap does not apply to out-of-pocket spending on Part B drugs.)
Approximately 10 – 20% of my clients exceed the Initial Coverage phase, enter the Coverage Gap (aka Donut Hole), and spend more than $2,000 in copays and coinsurance each year. The above changes will be a huge help for these people.
So, it appears the Biden administration has achieved a very comprehensive set of changes that will really help us seniors. These changes are the most significant improvements since Medicare D was created in 2006.
That said, I will be watching several issues very closely when 2025 Part D plans are rolled out at the end of 2024:
Limiting what consumers pay out of pocket means that the Part D insurers will have to pay more.
Will Medicare reimburse the insurers at a level that allows them to offer the improved coverage at reasonable premiums? Or….
Will Part D insurers pull out of the market, reducing choices for seniors?
Longer term, these benefit improvements certainly mean that Medicare will be paying out more for prescription benefits. Will the savings achieved by negotiations with the drug manufacturers offset the increased costs to Medicare? Only time will tell.
If you have questions or concerns about your Medicare benefits, please do not hesitate to call me. Of course, if you have friends or family who have questions about Medicare, please send them my way.
Wishing You Good Health in 2024,
Jeff
Jeffrey W. Werner
OTL Benefits – “On The Level”
Office: 978-447-3737
Mobile: 978-604-3233
Fax: 978-616-4539
We offer all plans available in your area. You can contact Medicare.gov or 1-800-MEDICARE or your local State Health Insurance Program (SHIP) to get information on all of your options.