Citing the high cost of insulin as a common barrier to proper diabetes treatment, CMS has announced a new model to allow beneficiaries additional Part D plan options with lower out-of-pocket costs for insulin. Under the Part D Senior Savings Model (Model), a broad range of plan-formulary insulin will cost no more than $35 for a 30-day supply. The Model will apply to beneficiaries receiving Part D coverage via standalone prescription drug plans and through Medicare Advantage. The agency has also instituted a Request for Applications process to allow eligible pharmaceutical manufacturers and Part D sponsors to apply to participate.
Part D out-of-pocket costs vary depending on what “phase” of coverage a beneficiary is in – deductible, initial coverage, coverage gap, or catastrophic coverage. During the coverage gap phase, manufacturers give a discount (70% of negotiated price), with beneficiaries paying 25% and plan sponsors 5% of negotiated price. This is the only phase in which drug manufacturers participate.
Medicare allows “enhanced plans” to offer lower cost sharing or cover more drugs than typical, but such plan sponsors charge additional premiums. Under the current model, however, plans are disincentivized from reducing cost sharing in the coverage gap to under 25% because manufacturers will discount only 70% of the remaining amount, rather than 70% of the negotiated price, leaving plan sponsors to pay the difference. Therefore, few plan sponsors reduce cost sharing in the coverage cap and “virtually” none do for insulin, according to CMS.
The Model seeks to reduce the disincentive that exists for plans to provide supplemental benefits for insulin in the coverage gap. Under the Model, where a participating Part D sponsor offers such benefits, participating pharmaceutical manufacturers will pay the 70% on the negotiated price, before application of supplemental benefits. In other words, plan sponsors will not be left with higher costs.
To encourage participation, CMS will give participating Part D sponsors the option of additional risk corridor protection for calendar years 2021 and 2022 for benefit packages that have higher-than-average enrollment from insulin-dependent diabetic patients. Because manufacturers pay substantial rebates for insulin prescriptions, attracting more insulin users will increase manufacturer rebate payments for plan sponsors, which may offset premium increases. CMS anticipates that manufacturers will be incentivized to participate because they will see increased utilization for their products and a more adherent patient population.
Manufacturers wishing to participate in the Model must apply by March 18, 2020. Shortly thereafter, CMS will make available to plan sponsors the list of participating manufacturers. Plan sponsors must submit a letter of intent by April 10, 2020 and apply to participate in the Model by May 1, 2020.
The CMS fact sheet is available here. The agency’s press release is available here. The pharmaceutical manufacturers request for applications is available here. The plan sponsor request for applications is available here. Finally, a March 12, 2020 webinar hosted by CMS discussing the Model is available here.
