October 1, 2010—Virtually all of the nation’s drug manufacturers have agreed to cut the cost of covered brand-name drugs and biologics in half for enrollees in Medicare Part D’s infamous “donut hole” beginning next year.
Drug companies had until Sept. 1 to sign agreements to give the 50 percent discounts in order to be reimbursed by Part D in 2011. The Centers for Medicare and Medicaid Services (CMS) announced on Sept. 23 that manufacturers representing 99.9 percent of drugs covered by Medicare in 2009 had done so.
The health care reform law signed by President Obama in March began a phased-in closing of the donut hole through 2020. Part D beneficiaries currently pay 25 percent of their annual prescription drug costs until they reach $2,830. At that point, they must begin paying their prescriptions’ full cost until their total out-of-pocket spending hits $4,550. Catastrophic coverage then takes over and enrollees pay only 5 percent of costs.
Earlier this year, Part D beneficiaries who have fallen into the coverage gap began receiving one-time, tax-free $250 rebates from the government.
Beginning next year, beneficiaries in the coverage gap will receive a 50 percent discount when purchasing their brand-name prescription drugs. Part D plan sponsors will then submit invoices to participating pharmaceutical companies, which will have 38 days to pay the invoices. With the exception of drugs not covered by the agreement, companies will be required to pay invoices even when amounts are in dispute but will be entitled to refunds if the dispute demonstrates the funds were paid erroneously.
A New Duplicate Discount Issue?
The agreements that the companies signed do not explicitly mention the 340B drug discount program. Hospitals enrolled in the program, however, are concerned that manufacturers might complain about the risk of duplicate discounts arising from their legal obligation to give both 340B and “donut hole” discounts on the same drug.
If CMS elects to provide relief to manufacturers on this duplicate discount issue by excluding 340B drugs from the new agreement, Part D sponsors might respond next by demanding that 340B providers pass along a greater share of their 340B savings through lower reimbursement rates.
Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents hospitals enrolled in 340B, notes that under the agreement, the coverage gap discount is 50 percent of “negotiated price,” which is in part based on discounts that Part D sponsors choose to pass along to enrollees at the point of sale. SNHPA believes that since Congress created the 340B program to enable safety net providers to improve and expand services, not to provide patients with drugs discounts at the point of sale, 340B discounts are clearly distinguishable from the types of discounts factored into drug prices under the coverage gap program.
SNHPA officials say they will be monitoring this matter closely as the effort to eliminate the coverage gap unfolds.