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SFC Drug Pricing Proposal Would Increase Part D Manufacturer Discounts for Some Therapeutic Areas

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Avalere analysis finds that tying Medicare Part D manufacturer discounts to utilization in the catastrophic phase instead of in the coverage gap would have differential impacts by disease area.

In July 2019, the Senate Finance Committee (SFC) voted to advance the Prescription Drug Price Reduction Act (PDPRA) of 2019, which would make significant changes to Medicare payment for prescription drugs. Specifically, the PDPRA would change the Medicare Part D benefit design to eliminate the coverage gap discount program—under which manufacturers currently pay 70% of brand drug costs in the coverage gap for beneficiaries who do not receive the Low Income Subsidy (LIS)—and create a new 20% manufacturer discount in the catastrophic phase of the benefit for both non-LIS and LIS beneficiaries. Therefore, the capped liability that manufacturers face in the coverage gap would change to an uncapped discount in the catastrophic phase.

Avalere’s analysis finds that the impact of these changes on manufacturer discount liabilities would vary widely by drug and manufacturer. Liability for some drugs would decrease, but on average, manufacturer discount liabilities would increase by 69%. Drug groups with the largest increases by dollar amount are listed below.

Figure 1. Drug Groups with Largest Increases in Manufacturer Discount Liability, 2022

Drug Group Estimated Increase in Discount Liability
Antivirals (e.g., hepatitis agents, antiretrovirals) $1.82B 725%
Antineoplastics and adjunctive therapies (e.g., antineoplastic enzyme inhibitors, antineoplastic hormonal and related agents) $1.76B 469%
Miscellaneous psychotherapeutic and neurological agents (e.g., multiple sclerosis agents, antidementia agents) $0.95B 293%
Anti-inflammatory analgesics (e.g., anti-TNF alpha monoclonal antibodies, soluble tumor necrosis factor receptor agents) $0.81B 742%
Miscellaneous therapeutic classes (e.g., immunomodulators, potassium removing agents) $0.63B 551%
Antipsychotic/antimanic agents (e.g., miscellaneous antipsychotics, benzisoxazoles) $0.51B 698%
Miscellaneous endocrine and metabolic agents (e.g., metabolic modifiers, corticotropin) $0.43B 326%
Miscellaneous cardiovascular agents (e.g., pulmonary hypertension treatments, miscellaneous cardiovascular agents, or prostaglandin vasodilators) $0.39B 410%
Miscellaneous respiratory agents (e.g., pulmonary fibrosis agents, alpha-proteinase inhibitors) $0.24B 442%
Passive immunizing and treatment agents (e.g., immune serums, passive immunizing agents, or monoclonal antibodies) $0.15B 816%

Note: Excludes beneficiaries with claims paid by Employer Group Waiver Plans or the Limited Income Newly Eligible Transition Plan and beneficiaries residing outside the 50 states and DC. Assumes no change in pricing due to proposed inflation-based rebate or interaction with other provisions of PDPRA. Drug groups based on 2-digit Generic Product Identifiers from the Medispan® database; examples include 4-digit GPI drug class names for the drugs with high total Part D spending in each GPI-2 group.

Source: Avalere simulation of Medicare Part D program using 2017 Part D Drug Event data.

Under the Part D redesign provisions of the PDPRA, the drug groups that would see the highest increases in Part D discount liability would include antivirals, cancer treatments, and treatments for neurological conditions such as multiple sclerosis. For drugs in these therapeutic areas, the uncapped 20% catastrophic discount would be significantly larger than the capped 70% discount in the coverage gap.


Avalere used Medicare Part D Prescription Drug Event data received from the Centers for Medicare & Medicaid Services under a Data Use Agreement (DUA) to simulate the Part D benefit for 2022 under both current law and PDPRA. Per the DUA’s requirement, Avalere identified a random sample of 8.4M beneficiaries, representing less than 20% of the total Part D population. Avalere excluded the following populations from the analysis: those for which benefit design data is missing, including those with claims paid for by an Employer Group Waiver Plan; those residing outside the 50 states and DC; and those enrolled in the Limited Income Newly Eligible Transition program.

Avalere arrayed each beneficiary’s Part D claims chronologically based on prescription fill dates. We then used Part D formulary and benefit design data to identify formulary coverage for each claim based on NDCs and determined tier placement and cost sharing for each drug on formulary. In addition, we identified LIS status for each claim based on monthly LIS cost sharing group.

To model the current law benefit design, Avalere deflated 2022 benefit parameters to 2017 dollars using annual percentage increases in Part D per capita benefits in order to account for policy changes to the calculation of the catastrophic threshold under current law, used 2017 negotiated prices, and assumed scripts filled at in-network preferred pharmacies in determining cost sharing. Avalere also assumed plan-specific formulary coverage, tier placement, and cost sharing for 2017 in the deductible and initial coverage phase but applied standard benefit design in the coverage gap and catastrophic phases. For non-formulary drugs, Avalere assumed placement on the non-specialty tier with the highest cost sharing (often non-preferred tier). LIS status for each member month and cost sharing for scripts filled in those member months were reduced to statutory limits.

To model the PDPRA, Avalere applied plan-specific deductibles, continued initial coverage benefit design to an out-of-pocket (OOP) cap for LIS and non-LIS, set the OOP cap equal to $3,100 in 2022 dollars, shifted catastrophic costs to plans over 3 years beginning in 2022, and created a 20% manufacturer discount in catastrophic phase. Avalere assumed no behavioral changes due to the PDPRA.

Avalere then used 2-digit Generic Product Identifiers from the Medispan® database to identify products in each drug grouping by National Drug Code. Avalere summed discount liability for all products by drug group under both the current law and PDPRA simulations. Results from this sample are weighted to reflect the broader Part D population based on their share of total enrolled member months. Avalere inflated all outputs to reflect drug cost and enrollment growth using data from CMS’s Final Call Letters and the 2019 Medicare Trustees Report.

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