impact of health reform on prescription drugs drug plans (pdp) and medicare advantage prescription...
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Impact of Health Reform on Prescription Drugs
Page 2
Indirect Effects – Increased Rx Volume
= More Prescriptions!
Page 3
Retiree Drug Subsidy (RDS)
Before HCR Tax-Free Subsidy
RDS as tax- deductible
income
After HCR Tax-Free Subsidy
RDS as tax- deductible
income
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Medicare
Date ProvisionJan 1, 2010
$250 rebate to beneficiaries who reach the coverage gap.
2011 – 2020
Reduction of coinsurance rate from 100% to 25% in the coverage gap
Brand: 50% manufacturers; 25% Govt
Generic: 75% Govt
100% of negotiated price will still count toward out-of-pocket threshold used to define coverage gap.
2011
Payment cuts to Medicare Advantage Plans.
July 1, 2013
Eliminates tax deduction for employers who receive Retiree Drug Subsidy (RDS) payments.
31% of large employers in the private sector offer benefits to Medicare- eligible retirees in 2008.
Costs: John Deere ($150 million), Caterpillar ($100), Verizon ($970 million), AT&T ( $1 billion)
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Medicare (cont’d)
Prescription Drug Plans (PDP) and Medicare Advantage Prescription Drug Plans (MA-PD) are now required to consult with pharmacies to reduce wasteful dispensing in long-term care facilities (LTC).– Eliminates 30-day fills for Part D enrollees
residing in LTC facilities– Opts for daily, weekly, or automated dosing– Effective on January 1, 2012
Improvement in Part D MTM programs.– “Annual comprehensive medication review by a
licensed pharmacist” for targeted beneficiaries– Automatic enrollment for beneficiaries with ability
to opt out– Effective March 23, 2012
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Medicaid
Increase in Medicaid drug rebate percentage– Brands: 23.1%
– Clotting factors and drugs approved exclusively for pediatric use: 17.1%
– All rebate increases will be extended to Medicaid managed care plans
Federal Upper Limit (FUL) for generic reimbursement will be calculated using AMP– “No less than 175 percent of the weighted average of the most recently
reported monthly AMP”
– Improves generic drug reimbursement rates for retail pharmacies compared to Deficit Reduction Act of 2005
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Medicaid (cont’d)
New definition of AMP (Average Manufacturer Price)– Only considers:
• Sales from manufacturers directly to retail pharmacies
• Sales from wholesalers distributed only to retail community pharmacies
– Includes all discounts and rebates extended to retail pharmacies
– Excludes discounts and rebates extended to wholesalers, PBMs, mail order pharmacies, etc.
– Pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis
Effective Date– First day of the first calendar year quarter that begins at least 180 days
after the date of enactment of this Act
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Pharmacy Benefit Managers (PBMs) and Disclosure
Disclosure of financial information to:– Secretary of HHS if contracted with PDP and MA-PD plans.
– Health Plan if contracted with a plan in the new state exchanges
Information will include:– Percentage of Rx’s dispensed by retail vs. mail order pharmacies
– Generic dispensing rate by pharmacy type
– Aggregate amount of rebates, discounts, and price concessions
– Amount of rebates/discounts passed to plan sponsor along with total # of Rx’s dispensed
Regarded as confidential information
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PBMs
Focus on preventative services and wellness programs– Validates clinical programs already provided by PBMs
All health entities to disclose financial information and relationships to Congress by April 1st, 2013– Hospitals, physicians, pharmacists, manufacturers, distributors
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Pharmaceutical Industry
Annual fees totaling $16 billion from 2014-2019– Includes pharmaceutical manufacturers and importers
– $2.8 billion/year after 2019
– Fee per entity is dependent on annual sales
– Orphan drug sales excluded from analyses
Excise tax of 2.9% on medical device manufacturers for the sale of any taxable medical device after December 12, 2012
– Also includes medical device importers
50% rebate on brand name drugs dispensed to Medicare Part D patients in the coverage gap
– Possible source of revenue due to increased dispensing of costlier brand name drugs
FDA authorized to approve generic versions of biologic drugs– 12 years of exclusive use before development of generics
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Over-The-Counter Products
Annual contributions to flexible spending accounts (FSA) will be limited to $2500/yr– 13.3 million taxfilers had FSA(s) in 2003
Non-Physician prescribed OTC products– Excluded from HRA and health FSA reimbursements.
– No longer deemed as qualified medical products for tax-free reimbursements through HSA and Archer Medical Savings Account
Increased tax from 10 to 20% for non-qualified medical expenses purchased through HSAs
Bottom Line: Decreased $$ for a billion dollar industry
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Non- Eligible OTC products– Antacids
– Cough, Cough & Flu medicines
– Anti-Diarrheals
– Laxatives
– Sleep Aids
– Anti-fungals
– Non-Steroidal Anti-inflammatory Agents
– Plus more!!
Eligible OTC products– Non-Eligible products prescribed
by physicians.
– Insulin
Over-The-Counter Products (cont’d)
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Pharmaceutical Industry (cont’d)
Better reimbursement rates from new AMP definition– Deficit Reduction Act of 2005 called for less reimbursement for Medicaid
generic drugs
Exempt from Medicare DME accreditation if medical equipment sales are < 5% of average Rx sales over 3yrs– Otherwise, should meet accreditation standards by Jan 1st, 2011
Expansion of 340b program– Covered entities now allowed to contract with multiple pharmacies to
provide pharmacy services.– Another source of revenue for pharmacies, particularly independents
Decreased profits due to increased dispensing of brand name drugs to Part D enrollees, particularly in coverage gap
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Pharmaceutical Industry (cont’d)
Collaboration with Part D plans in dispensing techniques to reduce waste in long term care facilities starting 2012– Daily or weekly dispensing for Part D members in LTC facilities
– Use of bingo card and cassette dispensing
– Negotiations between NCPA and CMS to ensure proper dispensing fees are appropriated according to the frequency of dispensing and costs of specialized packaging
– Opportunity for independent pharmacies to contract with Part D plans due to decreased competition with mail order and retail pharmacies that cannot supply daily or weekly dosing
Page 15
Impact of HCR on Prescription Drugs
Enhancements RestrictionsIncreased Rx volume
‐
PBMs
are the biggest winners
Retiree Drug Subsidy no longer tax‐deductible
income
New FDA authorized process for generic
availability of biologics
Annual Fees for Pharma
Grants for reimbursements for MTM services Health FSA cap and reimbursement
restrictions on OTC products.
Federal Upper Limit (FUL) pricing calculated by
new Average Manufacturer Price (AMP)
Excise taxes on medical device manufacturers
and importers
Contracts with Long Term Care (LTC) facilities
for waste reduction
Increase in Medicaid drug rebate percentage
Closing of coverage gap from 100 –
25% Payments cuts to Medicare Advantage Plans
$250 rebate to Part D enrollees in coverage Decreased bargaining power for pharmacy
benefit managers due to transparency
requirements?