WASHINGTON — When President Trump unveiled his plan to lower prescription drug prices in a Rose Garden speech last month, he said he would inject more competition into the market by bolstering negotiating powers under Medicare. But experts analyzing the plan warn of a possible side effect: The proposal could significantly increase out-of-pocket costs for some of the sickest people on Medicare.
At the heart of the president’s plan is a proposal to switch some expensive drugs from one part of Medicare to another part — moving them from Part B, the medical benefit created in the original 1965 Medicare law, to Part D, the outpatient drug benefit added by Congress in 2003.
Under Part D, the government contracts with private health insurance companies to manage the benefit and negotiate discounts with drugmakers. There is no such negotiation for the drugs covered by Part B, which are administered by infusion or injection in doctors’ offices or hospital outpatient departments.
But Medicare beneficiaries typically pay a larger share of the costs for Part D drugs. Many beneficiaries have supplemental insurance, such as a Medigap policy, to help pay their share of the bill for drugs covered under Part B. Medigap policies are not allowed to cover Part D expenses.
AARP, the lobby for older Americans, and advocates for cancer patients are already expressing concerns. The problems are not inevitable, they say, but will be difficult to solve.
“People may see a lot higher out-of-pocket costs if a drug moves from Part B to Part D,” said David M. Certner, the legislative policy director of AARP.
Under Part B, beneficiaries are generally responsible for 20 percent of the Medicare-approved charges for drugs and doctors’ services, but the most popular Medigap policies cover the beneficiary’s share. By contrast, in Part D, beneficiaries may be responsible for 30 percent of the cost of some drugs, or more, depending on the terms of coverage set by their drug plan.
Another potential problem is that nine million Medicare beneficiaries who are enrolled in Part B do not have drug coverage under Part D. The White House has not said how their drug bills would be paid.
Administration officials and Republicans in Congress often describe Part D — proposed by President George W. Bush and pushed through Congress by Republicans — as a success that shows the value of competition. Benefits are delivered entirely by competing private health plans.
“President Trump has called on us to merge Medicare Part B into Part D, where negotiation has been so successful on so many drugs,” said Alex M. Azar II, the secretary of health and human services.
Dr. Steven B. Miller, the chief medical officer of Express Scripts, one of the nation’s largest pharmacy benefit managers, said he was confident that his company could save money for beneficiaries and the government if it could manage drugs now covered by Part B of Medicare.
“Part D has been under budget every year, and member satisfaction is extraordinarily high,” Dr. Miller said. “It’s a very successful program. That’s why people are excited about moving drugs into Part D.”
Doctors, however, have doubts that shifting drugs from Part B to Part D of Medicare would bring the promised savings.
“If I were a policymaker, I might think it was a good idea,” said Dr. Jeffery C. Ward, an oncologist at the Swedish Cancer Institute in Edmonds, Wash. “But as a physician, I’m convinced that it could be a disaster if done wrong. I’m not convinced that switching those drugs will save the government any money. I don’t think the Part D plans can dicker a better price than the average sales price” now used as a basis for payment in Part B.
Andrea J. Zlatkus, the practice manager for a group of rheumatologists in West Chester, Pa., was also skeptical. “The prices of Part D drugs have increased over the years at a much faster rate than the prices of Part B drugs that we use for treatment of our patients,” she said.
Cancer drugs are one of six “protected classes” of drugs in Part D of Medicare. Prescription drug insurance plans must cover “all or substantially all” of these drugs.
“That may limit the ability of Part D plans to negotiate deals,” said John F. Hoadley, a research professor at Georgetown University. “Oncologists tend to expect access to most or all available treatments, so it would be harder politically to remove protection from that class.”
Dr. Ward, the oncologist, said: “Part D has been helpful in lowering prices for senior citizens when there are generic alternatives or lots of competing drugs from which to choose. But in cancer care, we often have few choices. You can’t exclude a drug if it’s the only right drug for a patient.”
The public has until July 16 to comment on ideas in Mr. Trump’s blueprint and to recommend drugs that could be moved to Part D.
Mr. Trump has proposed one change that would clearly help Medicare beneficiaries, especially those with high drug costs. He wants Congress to put a limit on beneficiaries’ out-of-pocket costs for prescription drugs under Part D.
Medicare’s “catastrophic coverage” generally kicks in after patients have spent $5,000 of their own money on drugs under Part D. They are then responsible for about 5 percent of any additional drug costs, and those bills quickly add up if a person is taking drugs that cost tens of thousands of dollars a year.
“Most cancer drugs launched between 2009 and 2014 were priced at more than $100,000 per patient for one year of treatment,” the President’s Cancer Panel, an independent federal advisory committee, said in a recent report, which noted that newer cancer drugs were even more expensive.
Mr. Trump wants to give Part D plans more tools to manage the use of prescription drugs, including expensive specialty drugs and medicines in the six protected classes.
That suggests that Medicare patients could face new limits or controls on their use of prescription drugs — techniques widely used in commercial health plans.
Many of the medicines in Part B are high-cost biologic drugs made from living cells. Shifting their coverage to Part D could speed the adoption of less expensive copycat medicines known as biosimilars. Indeed, that may be one of the administration’s objectives, said Ronny Gal, a securities analyst at Sanford C. Bernstein & Company.
The Department of Health and Human Services has previously considered the idea of shifting coverage of drugs from Part B to Part D, but concluded that the switch would be difficult.
“Such a change would not be desirable for most categories of Part B drugs, but may be worth considering for a limited number of categories,” the department said in a 2005 report to Congress. A study in 2011 projected higher out-of-pocket costs for patients and said this “could impede beneficiary access to needed medication.”
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