Report: Two-thirds of Medicare Part D prescription plans to implement coinsurance
WASHINGTON — A new analysis released by Avalere Health Thursday found that Medicare Part D prescription drug plans are poised to increase significantly the use of coinsurance in 2015. Avalere found that two-thirds of stand-alone Part D PDPs will apply coinsurance — i.e., consumers paying a percentage of the total cost of the drugs — to at least their top two formulary tiers, an increase of 83% from 2014.
“Adding coinsurance to a second plan tier means that more beneficiaries will be looking at the full cost of branded drugs at the pharmacy counter,” said Dan Mendelson, CEO at Avalere Health. “This strategy has proven central to plan operations as they try to keep premiums low to maintain stability in Part D.”
Since the introduction of Part D in 2006, the use of specialty tiers has been more common in Medicare Part D than in other markets, such as employer-sponsored insurance. From 2012 to 2015, the number of Part D PDPs using specialty tiers has increased, jumping nearly 15% in four years. As a result, all PDPs will use a specialty tier in 2015, the first time this has occurred in the history of Part D, Avalere Health reported.
In Part D, plans can only place a drug on the specialty tier if the total drug price negotiated between the plan and pharmacies exceeds $600 month. Coinsurance, or the cost-sharing responsibilities of the beneficiary, is limited to between 25% and 33%, depending on the size of the deductible for a given plan. Unlike drugs placed on all other tiers, beneficiaries cannot appeal the cost sharing for drugs placed on the specialty tier.
“The clear trend toward specialty tiers in exchanges and Part D is likely to have an impact on employer-sponsored benefit designs over time,” said Caroline Pearson, VP Avalere Health. “Benefit managers and C-Suite executives are definitely taking notice of how active management of the pharmacy benefit may be able to reduce premiums.”
Perhaps more significant for beneficiaries and manufacturers is the major shift toward the use of at least two coinsurance tiers in 2015. Avalere’s analysis found that 66% of PDPs in 2015, representing 60% of covered Medicare Part D beneficiaries, will apply coinsurance to their top two tiers. In 2014, only 32% of PDPs (representing 35% Part D beneficiaries) did the same. In total, enrollment in plans with at least two coinsurance tiers increased from 6.4 million to 11.1 million from 2014 to 2015.
In most cases, these plans include one specialty tier and apply coinsurance to the non-preferred brand tier. Unlike the specialty tier, there are no restrictions on what drugs can be placed on non-specialty coinsurance tiers, nor are there cost-sharing limitations. Many of these tiers have cost-sharing rates ranging from 35% to 50%.
The shift toward more than one coinsurance tier has been accompanied by a shift toward formularies with five tiers. In 2015, 89% of plans will have five or more tiers, a 53% increase since 2012. The dominance of five-tier plans can be accounted for in part by a surge in the number of such plans with two coinsurance tiers in 2015 — while only three plans used this formulary structure in 2014, 335 plans will do so in 2015. Among these plans, coinsurance on tier four (typically used for non-preferred brand drugs) averages 44%.
“The inclusion of more coinsurance tiers on PDP formularies is designed to increase plans’ ability to obtain lower spending for high cost — but non-specialty — drugs,” said Christine Harhaj, senior manager, Avalere Health. “Unlike most specialty drugs, however, these treatments are often prescribed to a broad patient population and applying coinsurance rates may have the effect of significantly increasing cost sharing for a large number of Part D beneficiaries.”