WASHINGTON -- As the battle over the high cost of prescription drugs rages on, Congress is turning its attention to a lesser-known part of the price fight: the "donut hole" in Medicare Part D's drug program.
The donut hole refers to a soon-to-expire coverage gap in Part D, under which beneficiaries' required copays increase from 25% to 35% of brand-name drug costs after the beneficiary and their Part D insurer have spent a total of $3,750 in a given year. Manufacturer discounts currently take care of 50% and the insurer picks up the remaining 15% for beneficiaries in the donut hole. (For generic drugs, the beneficiary pays 44% of the cost and the plan pays the remaining 56%.)
Once the beneficiary spending and drug company discounts have reached a combined $5,000 (increasing to $5,100 in 2019), the donut hole ends and the beneficiary goes into a "catastrophic coverage" period in which, under a standard plan, he or she pays only a 5% copay for any remaining drugs for the year, with the insurer paying 15% and the federal government paying 80%.
The Affordable Care Act previously made the donut hole less onerous from the original Part D design and would have ended it entirely in 2020, allowing the beneficiary to pay a 25% copay for both generic and brand-name drugs throughout the time until the catastrophic coverage kicked in. For generic drugs and biosimilars, the insurer would pay the remaining 75% of the cost; for brand-name drugs, the insurer would pay 25% and the rest would be paid by the manufacturer in the form of a 50% drug discount, by Tara O'Neill Hayes, deputy director of healthcare policy at the American Action Forum, a right-leaning think tank here.
Then came the Bipartisan Budget Act (BBA) passed by Congress in 2018, which made further changes to the program: increasing the manufacturer discount during the pre-catastrophic coverage period from 50% to 70%, and decreasing the amount insurers would have to pay from 25% to 5%. Current beneficiaries also got a boost because the act closes the donut hole in 2019 instead of 2020, so they will get to the 25% copay a year sooner than they otherwise would have.
Meanwhile, another provision in the ACA has the potential to hurt seniors in 2020: the threshold for catastrophic coverage will jump from $5,100 to $6,650, a 30% increase, Hayes noted. This increase has been called the "Part D cliff" by some lobbying groups.
Pharma pushes back
Not surprisingly, brand-name drug companies have balked at the increased discount of 70% they must provide under the BBA while the insurers' share is slashed -- "a shift in payment burden that should be concerning for anyone advocating for seniors and access to the medicines they depend on," the Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group for drug companies, said in a statement provided to 51˶. According to media reports, PhRMA would like to see that 70% figure , which would save drugmakers about $4 billion over 10 years.
"That shift [to 70%] was largely based on a technical error made by CBO [the Congressional Budget Office] when scoring the BBA policy in February, and correcting that error – which would not reverse the closing of the donut hole – would protect seniors by helping restore balance to payment responsibility and securing the Part D program for the future," the PhRMA statement said. "Further, combining that fix with a solution to prevent the looming $1,250 spike in out-of-pocket costs in the donut hole, would save seniors money and leave seniors in the donut hole better off."
Seniors' groups disagree with the idea of rolling back drugmakers' share of the cost. "We must resist any attempt to raise drug costs by reversing the Part D donut hole deal," said Nancy LeaMond, executive vice president at the AARP, a lobbying group for consumers ages 50 and over, said on a phone call with reporters last week. "We're calling on the president and our senators and representatives to protect seniors." Megan O'Reilly, AARP's director for federal health and family issues, noted that any attempt to lower the amount of the drug companies' share below 70% "is going to result in increased costs for seniors."
Advocates also expressed concern that the BBA deal might be changed during the "lame duck" session of Congress that begins next week after members return from their Thanksgiving holiday. "We know drug corporations have made it their Number One priority in the lame duck session to roll back their share of costs in the donut hole," said Ben Wakana, executive director of Patients for Affordable Drugs Now, on the conference call. "That's why we plan to make sure the bipartisan [BBA] deal struck in February remains intact."