Among the features of the Part D structure is a federal reinsurance program in which, when a beneficiary reaches the catastrophic threshold in a given year, the government subsidizes 80% of remaining spending for the year. Part D plans pay 15%, and patients pay 5% in this scenario.
The rising cost of prescription drugs is an issue that impacts all American patients, and while a variety of policy proposals have been brought forward to address this issue—from the Trump administration’s proposal to link US drug prices with an international index to House Democrats’ proposals to allow Medicare to negotiate prices—a group of economists and policy experts have written a perspective article calling for changes to Part D that would see plans taking on greater risk.
Among the features of the Part D structure is a federal reinsurance program in which, when a beneficiary reaches the catastrophic threshold in a given year, the government subsidizes 80% of remaining spending for the year. Part D plans pay 15%, and patients pay 5% in this scenario.
According to the authors, in the first years of Part D, this reinsurance approach “seemed reasonable,” but the design has not kept pace with the market, particularly as specialty drugs have gained a prominent place in the healthcare landscape. Today, they write, reinsurance subsidies reach approximately $43 billion each year.
“As reinsurance spending grows disproportionately, plans bear less and less risk as a share of total spending,” say the authors. “This situation calls into question what is being gained through the use of private plans.”
Also of note is the fact that drug makers are largely responsible for contributions to address the Part D coverage gap, or “donut hole,” and plans have little liability for addressing costs in this phase. Federal policy that holds that Part D plans must cover nearly all drugs in 6 protected classes also limits plans’ ability to manage costs.
“The net result is that, today, Part D plans are actually responsible for only about 34% of total prescription-drug spending,” the authors write, while commercial plans paid an average of 85% of total drug costs in 2016.
The authors argue that Part D should be redesigned in order to relieve the disproportionate burden placed on the government and to make plans shoulder more risk. Any reforms should also include protections for beneficiaries, like out-of-pocket spending caps, and the government should be able to use its recouped funds to help keep premiums low.
“It took policymakers 40 years to add an outpatient prescription-drug benefit to the Medicare program. Let’s hope we don’t have to wait 40 more to modernize Part D,” write the authors.
Reference
Trish EE, Ginsburg PB, Joyce GF, Goldman DP. Who pays in Medicare Part D? Giving plans more skin in the game [published online November 20, 2019]. N Engl J Med. doi: 10.1056/NEJMp1912357.
How AI Can Help Address Cost-Related Nonadherence to Biologic, Biosimilar Treatment
March 9th 2025Despite saving billions, biosimilars still account for only a small share of the biologics market—what's standing in the way of broader adoption and how can artificial intelligence (AI) help change that?
Eye on Pharma: Sandoz Files Antitrust Suit; Yuflyma Interchangeability; Costco’s Ustekinumab Pick
April 22nd 2025Sandoz's antitrust suit against Amgen, the FDA’s interchangeability designation for Celltrion’s adalimumab biosimilar, and the inclusion of an ustekinumab biosimilar in Costco’s prescription program highlight growing momentum to expand biosimilar access and affordability for patients with chronic inflammatory diseases.
Will the FTC Be More PBM-Friendly Under a Second Trump Administration?
February 23rd 2025On this episode of Not So Different, we explore the Federal Trade Commission’s (FTC) second interim report on pharmacy benefit managers (PBMs) with Joe Wisniewski from Turquoise Health, discussing key issues like preferential reimbursement, drug pricing transparency, biosimilars, shifting regulations, and how a second Trump administration could reshape PBM practices.
President Trump Signs Executive Order to Bring Down Drug Prices
April 16th 2025To help bring down sky-high drug prices, President Donald Trump signed an executive order pushing for faster biosimilar development, more transparency, and tougher rules on pharmacy benefit managers—aiming to save billions and make meds more affordable for everyone.
How State Substitution Laws Shape Insulin Biosimilar Adoption
April 15th 2025States with fewer restrictions on biosimilar substitution tend to see higher uptake of interchangeable insulin glargine, showing how even small policy details can significantly influence biosimilar adoption and expand access to more affordable insulin.