June 10, 2010 – In a welcome development for 340B providers and their patients, the federal government begins mailing $250 checks today to elderly people caught in the Medicare Part D drug benefit’s coverage gap, better known as the “donut hole.”
Closing the gap was a key element of the health care reform law signed by President Obama in late March. Enrollees in Medicare Part D plans now pay 25 percent of their annual prescription drug costs until they reach $2,830. At that point, enrollees 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.
Under the health care reform law, enrollees in the gap will begin receiving checks from the Centers for Medicare and Medicaid Services (CMS) as soon as tomorrow to help defray their costs. Slightly more than 4 million beneficiaries are expected to get the payments, which will be provided in 2010 only.
Next year, drug companies will begin providing enrollees with a 50 percent discount on their brand-name drugs. Other phased-in federal subsidies will eliminate the coverage gap by 2020.
Relief for Hospitals
The policy changes are expected to provide relief to 340B hospitals and other safety-net providers that often pick up the cost of medications for patients while they are stuck in the coverage gap.
“We are pleased that patients stuck in the donut hole will get some assistance,” says Ted Slafsky, executive director of Safety Net Hospitals for Pharmaceutical Access, an organization of more than 500 hospitals serving low-income patients. “While the subsidy is very small, any type of assistance is appreciated.” He noted that many Part D beneficiaries who normally use retail or independent pharmacies turn to 340B providers for their medications while in the coverage gap.
According to a notice published by CMS on May 26, Part D plans will provide enrollees with the 50 percent discount that begins next year at point of sale, without health care providers’ involvement. Manufacturers then will have to reimburse the plans for the discount within 15 days after drugs are dispensed. The discount will be based on the “negotiated price” that Part D plans charge enrollees, which in turn will reflect subsidies, rebates, price concessions, and other discounts that Part D plans pass through to their beneficiaries.
In the notice, CMS made clear that all manufacturers will have to provide the 50 percent discounts during the 2011 Medicare Part D benefits year. Earlier, it had indicated that it might grant exemptions to some drug makers in extenuating circumstances or for the sake of patient safety. On Oct. 1, it plans to publish a list of covered drugs subject to the discount.
In addition, CMS has reversed itself and decided to use a third-party administrator to adjudicate Part D pharmacy claims, as mandated under the health reform law. Initially, it said neither the current electronic pharmacy-claims billing standard nor any substitute in the works would support the transfer of information from Part D sponsors necessary for coordination of discounts by a third-party administrator. However, it subsequently announced it would contract with a third-party administrator after all because is prohibited by law from “touching” the money.