AMCP Nexus 2024 session speakers Kelly K. Makay, RPh MBA, Senior Consultant, BluePeak Advisors, and Crescent Moore, PharmD, PhD, Director, Part D/Pharmacy, BluePeak Advisors, explored the implications of the CY 2025 Medicare Part D Redesign and the Inflation Reduction Act, including the successes and challenges faced by stakeholders as they prepare for the changes ahead.

The Inflation Reduction Act of 2022, signed into law in August, includes provisions that will have a significant impact on Medicare, such as government authority to negotiate drug costs, changes to Medicare Part D benefits, and premium limitations. Additionally, the act enforces a maximum monthly cap on Part D cost-sharing.
“2025 is going to be one of the biggest years for the IRA because there is so much going into place,” shared the session speakers. 
Successes thus far include making insulin available at $35 per month, providing access to recommended vaccines with $0 cost-sharing, expanding the low-income subsidy program under Medicare, and adjusting coinsurance for Part B drugs. Challenges include issues with coding and adjudication, as well as beneficiary misunderstanding leading to grievances.

The defined standard benefit (DSB) for Medicare has 4 phases: deductible, initial coverage limit, coverage gap (which will no longer apply starting in 2025), and catastrophic. Each phase has different liabilities for the member, plan, and pharmaceutical manufacturer. Enrollees can move between phases based on their total gross covered drug costs (TGCDC). 

In 2024 and 2025, eligible Medicare DSB costs can be paid by the individual, family members, CMS on behalf of low-income individuals, State Pharmaceutical Assistance Programs (SPAPs), certain Native American organizations, AIDS drug programs, and legitimate charities. A key difference is that in CY 2024, a discount paid by manufacturers is part of the Coverage Gap Discount Program. In CY 2025, Supplemental Part D coverage may be provided by enhanced alternative (EA) Part D plans and other health insurance (OHI). 

In CY 2024, true out-of-pocket (TrOOP) ineligible costs are paid for by other federal government programs, TRICARE, non-qualified SPAPs, and patient assistance programs. In CY 2025, a difference is that a discount paid Manufacturer Discount Program also contributes towards covering the costs. 
The Manufacturer Discount Program for 2024 includes a coverage gap discount program for eligible beneficiaries, covering 70% of ingredient costs in the coverage gap, while in 2025 and beyond, a discount program applies to low-income enrollees with a phase-in approach for small and specified manufacturers and excludes drugs selected for drug price negotiation starting in 2026. The program is TrOOP eligible in 2024 but not in 2025 onward and does not apply to low-income subsidy (LIS) beneficiaries.

The specified small manufacturer phase-in requires a manufacturer to meet certain requirements, such as being a specified manufacturer and having most total expenditures for specified drugs covered under Part D. This phase-in offers a discount for all enrollees on applicable products. The specified manufacturer phase-in also has specific requirements, including having a coverage gap discount program agreement in effect and representing a small percentage of total expenditures for Part D drugs in 2021. This phase-in provides a discount for low-income enrollees only, while non-low-income enrollees receive the standard discount on applicable products.
Successes so far include implementing a $2000 cap on out-of-pocket Part D drug costs and eliminating coverage gaps. However, challenges have arisen in areas such as coding and claim adjudication, accurate PDE reporting, increased plan liability, premium increases, and increased potential for plan consolidation.
Starting in 2025, the Medicare Prescription Payment Plan (M3P) is required for all Medicare plans that offer prescription drug benefits, with a few exceptions. This plan allows Part D enrollees to pay their out-of-pocket costs in monthly payments throughout the year, instead of paying at the pharmacy, and the Part D sponsor must cover the full cost of the medication including the participant's out-of-pocket liability.

Part D sponsors must offer enrollees the option to opt into a program that bills all out-of-pocket costs for covered drugs monthly, calculated based on cost-sharing and CMS' formula. Sponsors also need to notify pharmacies when an enrollee may benefit from the program. Part D sponsors must notify prospective enrollees of the program in promotional materials, provide education materials, and CMS offers support with marketing guidance, standardized materials, and tools for understanding.
Participants can request elections through a variety of methods, including a request form with their ID card, a paper option, a toll-free telephone number, and a website. When processing pharmacy claims, providers must submit billing transactions using the Part D plan's BIN/PCN, receive paid claim responses showing participant responsibilities, submit COB transactions to other health insurance if applicable, and receive paid claim responses showing a $0 participant responsibility.
Part D sponsors must bill monthly for any out-of-pocket costs that do not exceed the maximum monthly cap and provide multiple payment options. Failure to pay may result in being unable to disenroll from or decline future enrollment in a Part D or MAPD plan but can still terminate M3P participation or preclude participation in M3P in the following plan year. Disenrollment from a Part D or MAPD plan will terminate enrollment in M3P, and mid-year plan changes require re-election into M3P.

Successes include spreading Part D costs across the plan year, while challenges include member and staff education, grievances, plans covering beneficiary out-of-pocket costs upfront, and the potential for bad debt.

The Secretary selects drugs for negotiation based on total Medicare Part D and B spending. Drugs excluded from negotiation include those with generics available, recent approvals, low spending, or orphan designation. The number of drugs subject to negotiation will increase annually, with 10 Part D drugs in 2026, 15 in 2027, 15 Part D and B drugs in 2028, and 20 in 2029.

The Negotiated Maximum Fair Price (MFP) program evaluates evidence related to therapeutic alternatives, such as the therapeutic advance of selected drugs compared to others in its class and the cost of alternatives, to determine pricing. Manufacturers must submit data on costs, prior financial support, patents, and market sales to help determine fair pricing. Successes of the program include increased drug access for Part D beneficiaries and more competitive pricing from non-negotiated drugs, but challenges include formulary strategy and potential decreased rebates on negotiated drugs.

CMS is also implementing various measures to stabilize premiums and risk adjustment in Medicare Part D, including capping the IRA rate, updating risk adjustment models, and introducing a Premium Stabilization Demonstration.

The Standalone PDP Premium Stabilization Demo aims to lower the base beneficiary premium by $15 and limit total Part D premium increases to $35 between 2024 and 2025. It also narrows the upper thresholds of risk corridors to reduce PDPs' full risk for actual costs higher than their bids and increases government's risk sharing to 90%. The demo is voluntary and nationwide for standalone PDPs, including EGWPs, for CY 2025 and at least two subsequent demonstration years, with participation in CY 2025 required for subsequent years.

Session speakers suggested that plans focus on implementing the M3P solution based on determining who will benefit and targeting plan year criteria. Plans should also focus on educating staff, creating marketing materials, updating policies and procedures, and enhancing oversight and monitoring. For PBMs, the suggested emphasis is on testing scenario development, also implementing MP3, identify reporting for OOP cost accruals, identifying likely benefit claim scenarios, and updating PDE reporting to include M3P and Part D redesign. 

Reference
Makay K K, Moore C. CY 2025 Part D Redesign: A Medicare Odyssey. Presented at: AMCP Nexus 2024; October 14-17; Las Vegas, NV.