Weighing the Cost-Saving Benefits of Shifting Medicare Part B Drugs to Part D

The US Department of Health and Human Services (HHS) has proposed a series of changes in hopes to reform drug pricing in Medicare Part B by shifting certain drugs to Part D. Medicare Part B covers medication administered via infusions or injections in physician-run environments, whereas Part D covers outpatient prescriptions.

Researchers looked further into the proposed changes with the goal of discovering how the shift in coverage would affect total drug spending and patient cost-sharing.

The study, published in JAMA Internal Medicine, collected data on Part B drug utilization, patient cost-sharing and total spending from the Centers for Medicare & Medicaid Services (CMS) and compared factors year over year. In 2018, an estimated $21.6 billion was spent for 75 brand-name drugs in Part B.

The study states that the proposed policy estimates that Part D spending would be between $17.6 billion and $20.1 billion after rebates, a 6.9%-18.3% decrease. The goal of the proposed changes is to “reduce the cost of Part B drugs through the negotiation and utilization management processes of Part D plans. These processes are not currently allowed under Part B,” according to an editorial based on the study.

However, the study continued, the HHS Proposal may reduce total drug spending but it could increase out of pocket costs for some Medicare beneficiaries.

To further illustrate the findings of their study, authors, Nina Jain, MD, MBA, resident physician at Brigham and Women's Hospital and Thomas Hwang, AB, a researcher at Harvard Medical School spoke to First Report Managed Care to shed insight on a few key points.

Can you briefly describe what the proposed Medicare Part B drug pricing reform is? How is the shift from Medicare Part B to Part D supposed to lower total drug spending?

Jain: "Currently, Medicare Part B does not actively negotiate drug prices. (For Part B drugs, Medicare pays the average sales price paid to private purchasers plus a statutory add-on amount). The idea underlying this policy proposal is that plans in Part D have negotiating power that will help drive total spending down compared to Part B."

What drug classes were included in your study?

Hwang: "Our study included 75 brand-name drugs with the highest Part B expenditures, which accounted for 77% of fee-for-service Part B drug spending in 2016."

Can you summarize the cost-related findings of the study?

Hwang: "We modeled the effects of this proposed policy on patients’ out-of-pocket costs. Under this policy, out-of-pocket costs for patients without Medicaid or supplemental insurance were estimated to decrease for the majority of drugs. The favorable impact of this policy shift on cost-sharing would be greatest for beneficiaries who qualify for the Part D low-income subsidy. However, out-of-pocket costs were expected to increase for most beneficiaries, primarily those with supplemental insurance."

Jain: "For patients, the specific out-of-pocket cost impact would depend on the drug in question and patients' current insurance coverage. Many patients would see their out-of-pocket costs rise as a result of this policy shift. HHS could consider capping out-of-pocket costs to limit the negative financial impact on these beneficiaries." 

Based on the findings, how would the HHS proposal impact both total drug spending and out-of-pocket costs for Medicare beneficiaries?

Hwang: "Applying Part D plan negotiation to Part B drugs could save 7-18% on total spending after rebates, but some of those savings may be offset by increased out-of-pocket costs for many Medicare beneficiaries. If the Secretary decides to pilot this proposal, it is imperative that patient health outcomes, access, and quality of care are rigorously monitored. We would also stress that other Medicare reforms -- restructuring the reinsurance component of Part D, improving plans’ negotiating ability, and so on -- likely need to be implemented in parallel for those savings to be sustainable. In particular, shifting Part B drugs, many of which are costly, could exacerbate the recent growth in Medicare's reinsurance subsidy in Part D."

—Edan Stanley

Reference:

1. Hwang T, Jain N. Analysis of Proposed Medicare Part B to Part D Shift With Associated Changes in Total Spending and Patient Cost-Sharing for Prescription Drugs. JAMA Network. https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2720128.
2. Crosson F, Christianson J. Managing the Cost of Medicare Part B Drugs Implications for the Program and Beneficiaries. JAMA Network. https://jamanetwork.com/journals/jamainternalmedicine/article-abstract/2720123.

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