To lower out-of-pocket (OOP) costs of prescription medications for people enrolled in Medicare and to reduce drug spending by the federal government, several key changes to the Medicare Part D benefit were made possible with the passage of the Inflation Reduction Act (IRA) in 2022. Two of the IRA’s most important provisions will go into effect on Jan. 1, 2025—a $2,000 cap on OOP drug spending for all individuals with a Part D plan, and the opportunity to opt-in to the Medicare Prescription Payment Plan and spread costs throughout the year. This program is being offered by Part D plan sponsors.

As a result of these Part D benefit changes and the increased financial burden on Part D plans, many are concerned about the unintended consequences on patients, such as the potential for increased Part D premiums. The IRA does address this concern by implementing a premium stabilization program, beginning this year through 2029, limiting increases in the Part D base beneficiary premium to 6% growth each year. For 2025, the base premium is $36.78, an increase of $2.08 or 6% over the 2024 base premium. It is important to note, however, that this 6% cap does not apply to individual premiums that plans charge. In fact, a recent analysis by Avalere illustrates that Part D Plan premiums are increasing by double digits.

An increase in Part D plan premiums of double digits has been reported by Medicare beneficiaries themselves. A recent national poll from the PAN Foundation’s Center for Patient Research finds that nearly one in three (28%) Medicare beneficiaries enrolled in Part D plans say the cost of the monthly premium for their prescription drug plan is higher in 2024 than it was in 2023.

Among those who reported an increase, 11% say their premiums increased 16% to 20%, while 10% say their premiums increased by more than 20%. Unfortunately, two in five (40%) of Medicare beneficiaries enrolled in Part D plans say they have financial difficulty affording the monthly premium for their prescription drug plan.

What can be done to stabilize premium growth and make costs more affordable for patients?

The annual open enrollment period (Oct. 15 – Dec. 7) presents an opportunity for Part D enrollees to compare plans for lower-priced coverage that meets their needs. According to the Kaiser Family Foundation,Medicare Advantage drug plans are anticipated to have lower monthly premiums than stand-alone drug plans.

The variability in monthly premium costs was a driving factor behind a new voluntary premium stabilization demonstration program announced in July by the Centers for Medicare & Medicaid Services (CMS) for stand-alone Part D plans. The demonstration program has three components for the plans that choose to participate:

It lowers the base beneficiary premium by $15 (or less if a $15 reduction would result in a plan premium of less than $0).

It limits total Part D premium increases to $35 between 2024 and 2025 (applied after considering the $15 reduction).

It offers enhanced protection by the federal government against the risk of losses for stand-alone plans.

Overall, this demonstration program hopes to stabilize the Part D plan market in the initial transition years of the IRA’s Part D benefit changes and to test whether the premium changes improve the efficiency and overall economics of the Part D benefit changes.

Finally, charitable foundations such as the PAN Foundation offer financial assistance to eligible individuals to help cover their insurance premium costs. As OOP costs for prescription medications start to decrease, but other costs, such as Part D plan premiums, continue to be a burden on Medicare beneficiaries, this kind of assistance will become even more important.

We all look forward to monitoring the implementation of CMS’s demonstration project and hopefully see that over time, premiums for stand-alone plans begin to stabilize, because swapping one high healthcare related cost for another won’t end up helping patients in the long run. 

Amy Niles is chief mission officer at PAN Foundation.

1. Part D Premiums Increasing Despite Stabilization Program. Avalere. October 17, 2023. 

https://avalere.com/insights/part-d-premiums-increasing-despite-stabilization-program#:~:text=In%20a%20recent%20analysis%2C%20however,for%20the%202024%20plan%20year

2. National Polling: Medicare Patients Seeing Premium Costs Increase in 2024. PAN Foundation. March 29, 2024. 

https://www.panfoundation.org/national-polling-medicare-patients-seeing-premium-costs-increase-in-2024/

3. Cubanski, J.; Neuman, T. What to Know About Medicare Part D Premiums. KFF. August 1, 2024. 

https://www.kff.org/medicare/issue-brief/what-to-know-about-medicare-part-d-premiums/

Articles

Why looming benefit changes—and the resulting unintended consequences—are a concern for patients.

The Latest Surrounding Rising Medicare Part D Premiums

We all had some time to reflect on the published price reductions for the 10 drugs under the Inflation Reduction Act of 2022 (IRA). The Biden administration and the Harris election campaign claim victory, and the drug industry is relieved that the impact has been limited. On the surface, this seems like an unusual win-win. However, experience in other countries shows that once introduced, price controls become a convenient tool to address government budget overruns.

The Democratic party is celebrating its “victory over the powerful drug industry” with the institution of price controls on prescription drugs, lowering Medicare patient cost of insulin to $35 and capping total patient out-of-pocket costs to $2,000 annually. The first price reductions range from 38% to 79% discount off list price for the initial 10 drugs that are part of the initial round; these reductions go into effect in 2026.

Pharma stays muted as it realizes that the actual impact is limited in the following ways:

The negotiated discounts off list price are not much higher than the rebates companies already pay. Since the rebates are confidential, it is hard to calculate actual savings, but 

estimates it at an actual 22% discount over current net prices for the Medicare portion of sales.

 The Centers for Medicare & Medicaid Services (CMS) has exercised some restraint in its pricing demands—even though drug companies have no “negotiation” leverage—and face steep penalties for not accepting the dictated outcome.

Many of the drugs are close to patent expiration, at which time a much higher level of net price reductions automatically occurs with generic competition. 

 also argues that it hurts the generics savings that would otherwise be delivered later.

 This is consistent with experience in Europe, where generic markets have been less attractive in countries with early price controls such as France, Italy, and Spain.

With everybody seemingly happy, the IRA implementation is deemed successful.

As mentioned, the actual drug cost savings starting in 2026 will be very limited. The annual expansion of the list of price-controlled drugs will increase the impact of the program, but it will take several years before this materializes. A new administration may be very tempted to further accelerate the addition of new drugs and expansion to the private market, as already propagated by Sen. Bernie Sanders et al.

Price control laws have been introduced in virtually every high-income country. They seem to always raise the governmental appetite for deeper controls:

Formulated savings goals are hardly ever met, thus feeding appetite for more action.

It is politically much easier to tighten and expand existing controls than it is to first introduce them.

Both Democrats and Republicans have expensive new spending programs for causes that are higher on the sympathy list than pharma.

The negative impact on industry investment and availability of new treatments in the future is less concrete in people’s minds.

Predicting the future in politics is a dangerous endeavor. The attitude toward drug price controls may only be slightly different between Democratic and Republican administrations. Whether a Trump or Harris administration, it will have to deal with the impact of expiration of the 2017 Trump tax cuts at the end of 2025. Trump has also claimed to cut social security taxes, and both parties have committed to eliminating taxes on tips. Both parties also seem committed to sustaining or elevating defense spending and to protect social security, which is facing insolvency.

As a result, the pharma industry seems to be at high risk of more price control measures. Factors driving that risk include: (1) CMS has all the power to insist on deeper price cuts in the next round of negotiations; (2) a future Harris administration may expand CMS negotiations to more drugs faster and to extend it to the private market; and (3) a future Trump administration may try to repeal elements of the IRA but is not very motivated to touch the drug pricing part of it.

Ed Schoonveld is a value & access advisor for Schoonveld Advisory and author of The Price of Global Health.

https://www.wsj.com/opinion/biden-drug-prices-inflation-reduction-act-pharma-cms-generics-6be3a99a

2. Schoonveld, E. In Search of the ‘Bad Guy’. 

https://www.pharmaceuticalcommerce.com/view/in-search-of-the-bad-guy-

As the dust settles on the first round of Medicare negotiations, not everything is what it seems.


Reflections on IRA Drug Pricing Negotiations

, there was one main concern on our minds: how to launch a general medicine brand into a progressively changing and fragmenting retail and ecommerce landscape. The historical model of “stick it in wholesale and pull through retail” clearly no longer worked. Almost all the brands launched into this model failed to meet their forecasts. At Blue Fin Group, we received call after call from our manufacturer clients complaining that branded prescriptions were increasingly being turned away by retail pharmacies of all kinds, with estimated abandonment rates reaching 50% to 60%. These were products with strong formulary coverage and reasonable affordability profiles for all forms of payer sponsored lives.

We believed the first signs of this issue became evident with the struggles faced by medications in the specialty lite category: product priced above $650 or below $2,000 a month. A solid example was the original pricing of PCSK9 inhibitors launched in 2015. Our attention at the time was solidly on this specialty lite area, but that product archetype simply proved to be the canary in the coal mine. The reasons for the struggle were that similar access hurdles such as prior authorizations and step edits were driving up the cost to serve, all while reimbursement on the products was in decline and cost of goods was rising.

With the arrival of the general medicine patent cliff came in late 2016, the profitable generic wave machine ended. And adding insult to injury, the government's CPI-U penalty to the generics started on Jan. 1, 2017, effectively ending the ability for generics to increase price after their initial race to the bottom for the first 18 months post-generic launch. We were concerned that this problem could spiral out of control, and we were the only firm talking about this online and on the industry conference stage. In fact, I presented this problem at the Informa Connect Trade & Channel Strategies meeting, which I’ve spoken at for the last 18 years. People in the audience had a look on their faces as if they had no idea what I was speaking about. Unfortunately, our fears and concerns were realized.

Over the past eight years, the situation has not only intensified but has also expanded to include regular branded drugs that were once readily available at every retail pharmacy across the country. Currently, there are about 4,400 branded prescription drugs that comprise a mere 1.5% of all prescriptions dispensed by retail pharmacies. The other 100 brands account for another 6.5% of all prescriptions, with the remainder being generics.

We’ve tried shaking and waking up industry to alert them to the problem. I’d have conversations with retail pharmacy leaders asking us to help educate pharma about the problem. None of the other industry pundits picked up on the gravitas of the situation. And when the direct and indirect renumeration fees went from the back end of the prescription adjudication and reimbursement process, we knew it was going to be like throwing a bucket of gas on an already burning fire.

I credit writing this series for making me realize that, in fact, this started long before specialty lite and the patent cliff. A key event that marked a shift in the classic insurance-based retail pharmacy market (see Figure 1 below) was the reintroduction of cash pharmacy back in 2006 with Walmart’s $4 generics. Most other major retailers followed suit. When 2011 rolled around and we witnessed the launch of GoodRx, I honestly didn’t think much of it. My eye was off the generic ball. I was centered on brands and mainly specialty brands at that. What GoodRx did in hindsight was democratize the prescription. It was the first tool a consumer could use to shop pharmacies and prices. For generics, this was a big deal. Two years after the patent cliff in 2018, the e-commerce pharmacy landscape changed dramatically with the arrival of Amazon Pharmacy, followed by its acquisition of PillPack. Arguably the pandemic masked this issue for a couple years from 2020 to 2022 until the shark-tank minded Mark Cuban’s Cost Plus Drugs further disrupted the market in 2022. 

From 2015 through current day, we have seen the increasing prevalence of digital pharmacies, which many manufacturers hoped would function like specialty pharmacies for retail. That model, however, hasn’t proven to deliver any better net revenue effect than retail from the data points we’ve studied with clients. It’s an alternative, but not necessarily a better one. Then, in the 2020 timeframe, came the emergence of tech-enabled hubs, a retail affordable solution that works somewhat like the patient services platforms used for specialty.

So the crux of my series on “Who Moved My Prescription?” parities the dilemma in the 1990s book 

 in which every day the mouse comes out of the hole and gets the same cheese, and without explanation, one day, the cheese is simply not there. If everything was working fine, the likes of Eli Lilly and Pfizer wouldn’t be launching direct-to-patient models. And now we are contending with telehealth/ecommerce/cash models that we refer to as lifestyle pharmacies, such as Ro and Hims/Hers. The illustration alluded to above shows the chaos and complexity of the current state of retail.

Today, we’re seeing vastly different approaches and perspectives on the profession of pharmacy, and it’s clear that neither the industry nor drug manufacturers know exactly where to turn. The old guard is trying to reinvent themselves a little too late, and the new guard is hoping to come in and blow it all up. Many manufacturer leaders are hoping this issue will resolve itself or that a new model will emerge to address these challenges.

From working with more than 450 manufacturers, we get a unique view of the industry and we see that branded Rx makers are left with a puzzle. It’s not about signaling the downfall of retail, the rise of e-commerce, or the increasing prominence of cash. Nor is it about promoting new pharmacy models.

Over the three decades I’ve been in this industry, we have taken pharmacies for granted. I’ve actually heard retail pharmacy called a “dumb pipe.” We focused on the science, the doctors, the payers, and the patients. We cared about specialty pharmacy because we could see the prescription journey and tie that back to our own patient services platforms. Specialty was cool. Retail was and is a black box.

So where do we go from here? We educate ourselves. We listen. We seek to understand. We try new things. We experiment. We educate management teams, boards, and investors. We reinvent.

Thank you for sticking with me throughout this series. I’ve learned and reflected a lot in the process. I’m excited to share there I’ve been invited back for another series in 2025; there are still a few more topics that need our attention.

Bill Roth is General Manager and Managing Partner of IntegriChain’s consulting business, which includes Blue Fin Group, a strategy consulting company he started in 2001, and the IntegriChain advisory services business.

Why this trend is occurring and ways that drugmakers are pivoting in order to remedy the situation.

Pharmaceutical Commerce - October 2024

The Latest Surrounding Rising Medicare Part D Premiums

Reflections on IRA Drug Pricing Negotiations

Who Moved My Prescription? Part VI: Abandonment of Branded Prescriptions