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CMMI Model Would Increase Gap Discounts for Non-Insulin Products

Summary

Avalere analysis finds that 51% of all drug spending for non-LIS beneficiaries using insulins and enrolled in enhanced plans in 2018 was for products not participating in the model.

The Part D Senior Savings Model, which was announced by the Centers to Medicare and Medicaid Services (CMS) in March 2020, is a 5-year model beginning in January 2021. The model allows participating enhanced Part D plans to lower out-of-pocket costs for insulin to a maximum $35 copay for a 30-day supply in the deductible, initial coverage, and coverage gap phases for beneficiaries who do not receive the Part D low-income subsidy (LIS).

In addition, the model will change the coverage gap discount program to allow participating enhanced plans to supplement the standard Part D benefit after (rather than before) manufacturers provide coverage gap discounts for insulin products included in the model (Figure 1). The following example shows the plan and manufacturer liability for a $500 drug and patient cost sharing of $35 under current Part D rules compared to under the model. As illustrated in the example, applying the supplemental enhancements after the manufacturer coverage gap discount would reduce the added plan liability needed to achieve a $35 copayment in the gap from $383 under current law to $115 under the model. This change allows the plan to provide more generous enhanced supplemental gap coverage for beneficiaries without reducing the discount paid by the manufacturer.

Table 1. Cost Liability Under Current Law and Under the Model for a $500 Drug in the Coverage Gap
Current Plan with Enhanced Supplemental Gap Coverage Offering Reduced Copay on $500 Drug
First, enhanced supplemental gap coverage applied $500 – $383 = $117
Second, manufacturer coverage gap discount applied 70% × $117 = $82
Then, enrollee payment set $500 – ($383 + $82) = $35
Model PBP with Enhanced Supplemental Gap Coverage Offering Reduced Copay on $500 Drug
First, manufacturer coverage gap discount applied $500 × 70% = $350
Enrollee payment set at $35 $35 (max copay amount)
Then, enhanced supplemental gap coverage remain $500 – ($350 + $35) = $115

Because beneficiary cost sharing would be significantly reduced compared to current coverage for brand drugs in the gap today under most Part D plans, the model slows beneficiaries’ progression through the coverage gap, resulting in higher gap discounts for the model insulins and for other brand drugs taken by those beneficiaries.

For the almost 950,000 non-LIS beneficiaries who were enrolled in an enhanced plan and used an insulin included in the model in 2018, Avalere finds that a large share (51%) of their drug costs were for products not included in the model. This means that the model’s changes in beneficiary cost sharing and coverage gap discounts for participating insulins are likely to affect manufacturer liabilities for products not participating in the model. For instance, Avalere estimates that over the 5-year model period, 26% of the increase in total manufacturer coverage gap discounts will be for brand drugs not participating in the demonstration.

There has been significant interest in the model, with over 1,600 enhanced Part D plans and many major insulin manufacturers participating in the model for the 2021 plan year. Depending on stakeholder experiences in the first year of the model, more plans may seek to participate in the future and a greater number of beneficiaries may switch to plans participating in the demonstration. At the announcement for the model, CMS Administrator Seema Verma indicated that, depending on results, the agency may look to expand the model to additional therapeutic areas and patient populations. As the model becomes established and grows, it is important to fully understand the impacts that this may have on stakeholders, including those not directly participating in the model.

Methodology

Avalere used a random 20% beneficiary sample of the 2018 Medicare Part D Drug Event Prescription Drug Event data to simulate utilization and costs for patients using an insulin participating in the Part D Senior Savings Model under both current law and the demonstration model. To simulate baseline stakeholder costs, Avalere arrayed claims for beneficiaries included in the sample chronologically based on the date of service and identified applicable coverage information for each drug claim based on the plan benefit package that covered the claim, e.g., applicability of the deductible, formulary coverage status, tier placement for each drug claim in both initial coverage and the coverage gap, cost sharing (coinsurance or copayment) associated with each tier. Avalere then adjusted benefit parameters to reflect future values and the increase in the coverage gap discount to 70% before simulating progression through the benefit to calculate baseline costs for key stakeholders.

To simulate the Part D Senior Savings Model, Avalere altered existing non-LIS cost sharing in all enhanced plans for on-formulary insulins that are participating in the model by not applying the deductible, reducing non-LIS cost sharing in initial coverage and the coverage gap to $35 (for a 30-day supply), and altering the coverage gap discount program to reflect 70% of total insulin drug costs in the gap (regardless of enhancements made to insulin cost sharing in the gap). Avalere inflated all output to reflect the full size of the Part D program, price and enrollment growth, and the 5-year period of the demonstration model.

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