Are Medicare Plans Complying With CMS Regulation?
Are Medicare Plans Complying With CMS Regulation?
Objectives: The US Centers for Medicare and Medicaid Services (CMS) have put forth guidance recommending coverage of 75% of the costs of 'all or substantially all' drugs in six therapeutic categories deemed medically necessary for Medicare beneficiaries: anticonvulsants, antidepressants, antineoplastics, antipsychotics, HIV/AIDS and immunosuppressants. For 2007 filings, we analyzed compliance by 36 leading prescription drug plans with the CMS guidance.
Methods: Using databases at the Tufts Center for the Study of Drug Development, we identified 201 drugs approved by the US FDA between 1962 and 2007 in the six therapeutic categories mentioned above. For these drugs, we gathered data from 36 prescription drug plans on prices, formulary placement, cost-sharing and conditions of reimbursement. Our primary source for formulary data was the Formulary Finder on the CMS website.
Results: Plans are not complying with the 'all or substantially all' guidance. Across all six categories, an average of 17% of drugs are not covered, with a higher percentage of exclusions among antineoplastics and immunosuppressants. In addition, 18% of covered drugs have one or more conditions of reimbursement, with prior authorization leading the way at 15%, even in categories in which the use of prior authorization is not sanctioned (e.g., HIV/AIDS).
Conclusions: Noncompliance with CMS guidance suggests CMS oversight may be lacking. Further research must be performed to determine whether, on balance, formulary exclusions and restrictions in these categories are harmful to patient outcomes.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) represents the most significant change to the entitlement program's benefit structure since its enactment in 1965. Beginning in 2006, Medicare beneficiaries have access to an outpatient prescription drug benefit (Part D) subsidized by the federal government and administered through private health plans. The MMA authorizes private stand-alone prescription drug plans (PDPs) for beneficiaries who get their hospital and physician service benefits through traditional Medicare. Beneficiaries can also obtain drug coverage through private Medicare Advantage plans that integrate prescription drug benefits with other Medicare-covered benefits. On 1 January 2006 an estimated 43 million Medicare beneficiaries were eligible to sign up for prescription drug coverage through Part D. As of November 2007, approximately 39.4 million Medicare beneficiaries are insured for pharmaceutical care, of whom 23.5 million are enrolled in a Medicare Part D plan. For some beneficiaries, Part D constitutes a new opportunity to gain access to drug coverage. For others, Part D replaces the drug coverage they already had under Medicare Advantage, Medigap or Medicaid. A Medigap policy is health insurance sold by private insurers to fill the gaps in traditional Medicare coverage; that is, help defray some of the healthcare costs that Medicare does not cover (Figure 1).
(Enlarge Image)
Figure 1.
Medicare enrollment (in millions). PDP: Prescription drug plan. Source:.[112]
Plans differ in the drugs they cover, the pharmacies they use and the prices they negotiate with drug manufacturers and pharmacies. Additionally, the costs to the enrollee for the monthly premium, the annual deductible, cost-sharing per prescription and conditions of reimbursement vary significantly by plan.
Plans can control the growth in prescription drug spending through the use of formularies. First, plans can encourage patients and physicians to select lower-cost medications, such as generics. Second, plans can negotiate lower prices with drug manufacturers in return for preferred placement of drugs on the formulary. Third, plans can discourage inappropriate use of medications by imposing prior authorization requirements.
Recent studies show plans participating in the Medicare drug benefit currently cover between 70 and 98% of drugs commonly prescribed to Medicare beneficiaries. It has been speculated, however, that early on during the drug benefit's implementation phase some plans would lure enrollment of large numbers of Medicare beneficiaries through lenient formulary design, but that once on board, enrollees would be faced with more restrictions on drug coverage: pejoratively termed 'bait and switch' tactics. Indeed, in the late 2007, the US Centers for Medicare and Medicaid Services (CMS) expressed surprise at the number of requests it has received from Part D plans to remove drugs from formularies, place them on less preferred tiers or impose conditions of reimbursement.
The MMA legislation points to the need for plans to strike a balance between providing beneficiaries with robust drug coverage and containing costs. Because Part D plans face some financial risk for drug costs, in an attempt to avoid adverse selection, they may want to structure their benefit in a way that appeals to low-cost beneficiaries and repels high-cost beneficiaries. Offering limited coverage with a restrictive formulary or strict utilization management, particularly for costly drugs, might discourage beneficiaries from enrolling. One way to mitigate both cherry-picking on the part of plans and adverse selection by beneficiaries is to risk adjust payments so that plans are paid higher premiums for enrollees likely to have high expenditures. Under Part D, CMS risk adjusts payments to plans. Another way to spread risk as effectively as possible is through establishing certain minimum requirements for plan formulary management. One method the federal government uses to ensure adequate coverage comprises sets of rules and regulations that participating plans should abide by. Perhaps the most explicit guidance is the 'all or substantially all' clause with respect to coverage of 75% of the costs of biopharmaceuticals in six broad therapeutic categories: anticonvulsants, antidepressants, antineoplastics, antipsychotics, HIV/AIDS and immunosuppressants. CMS defines the clause 'all or substantially all' as follows: 'substantially all' in this context means that all drugs in these categories are expected to be included in plan formularies. There are a few exceptions to the 'all or substantially all' clause. Medicare drug plans are allowed to exclude from their formularies: gefitinib (a cancer drug); fosphenytoin (an anticonvulsant); and either escitalopram (a selective serotonin reuptake inhibitor antidepressant) or citalopram (another selective serotonin reuptake inhibitor), but not both.
In addition, for newly approved drugs in these categories, CMS's expedited review requirement implies that for drugs launched after 16 April, 2007 plan Pharmacy and Therapeutics committees must make their decisions about a drug's formulary placement within 90 days of a drug's approval, rather than the standard 180-day maximum. And, CMS guidance stipulates that plans must subsidize 75% of the costs of drugs between the deductible and the initial coverage limit of $2400. In 2007, Medicare Part D's defined standard benefit had a $265 deductible and 25% co-insurance up to an initial coverage limit of $2400 in total annual drug costs, followed by a coverage gap (the so-called 'doughnut hole') until enrollees reach $3800 in total drug costs. After costs reach $3600, Medicare pays 95% of drug costs. With the exception of most antiretroviral drugs, patients prescribed one or more drugs in these six categories may be subject to prior authorization, quantity limits and step therapy. There is one exception: enfurvitide must be on all formularies, but prior authorization may be used for first-time users of this antiretroviral.
CMS acknowledges that patients being treated for diseases in these six categories are likely to have some of the highest drug and medical costs among all Medicare beneficiaries. However, CMS asserts that beneficiaries being treated with a drug from one or more of these six categories have special needs for uninterrupted therapies, particularly in light of outcome intervariability across drugs in these categories.
Cost considerations may not be used to determine whether to cover a drug from the six categories listed above. Nevertheless, cost-sharing arrangements and conditions of reimbursement (where sanctioned) may be influenced by cost considerations. Further, CMS explicitly allows plans to remove drugs from formularies at any time based on scientifically demonstrated safety issues. For example, for obvious reasons, plans do not cover drugs that have been withdrawn from the market. Also, plans may exclude from coverage drugs with black-box warnings (BBW); the FDA's strongest warning to physicians and patients that severe adverse reactions have been experienced during the use of a product.
Abstract and Introduction
Abstract
Objectives: The US Centers for Medicare and Medicaid Services (CMS) have put forth guidance recommending coverage of 75% of the costs of 'all or substantially all' drugs in six therapeutic categories deemed medically necessary for Medicare beneficiaries: anticonvulsants, antidepressants, antineoplastics, antipsychotics, HIV/AIDS and immunosuppressants. For 2007 filings, we analyzed compliance by 36 leading prescription drug plans with the CMS guidance.
Methods: Using databases at the Tufts Center for the Study of Drug Development, we identified 201 drugs approved by the US FDA between 1962 and 2007 in the six therapeutic categories mentioned above. For these drugs, we gathered data from 36 prescription drug plans on prices, formulary placement, cost-sharing and conditions of reimbursement. Our primary source for formulary data was the Formulary Finder on the CMS website.
Results: Plans are not complying with the 'all or substantially all' guidance. Across all six categories, an average of 17% of drugs are not covered, with a higher percentage of exclusions among antineoplastics and immunosuppressants. In addition, 18% of covered drugs have one or more conditions of reimbursement, with prior authorization leading the way at 15%, even in categories in which the use of prior authorization is not sanctioned (e.g., HIV/AIDS).
Conclusions: Noncompliance with CMS guidance suggests CMS oversight may be lacking. Further research must be performed to determine whether, on balance, formulary exclusions and restrictions in these categories are harmful to patient outcomes.
Introduction
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) represents the most significant change to the entitlement program's benefit structure since its enactment in 1965. Beginning in 2006, Medicare beneficiaries have access to an outpatient prescription drug benefit (Part D) subsidized by the federal government and administered through private health plans. The MMA authorizes private stand-alone prescription drug plans (PDPs) for beneficiaries who get their hospital and physician service benefits through traditional Medicare. Beneficiaries can also obtain drug coverage through private Medicare Advantage plans that integrate prescription drug benefits with other Medicare-covered benefits. On 1 January 2006 an estimated 43 million Medicare beneficiaries were eligible to sign up for prescription drug coverage through Part D. As of November 2007, approximately 39.4 million Medicare beneficiaries are insured for pharmaceutical care, of whom 23.5 million are enrolled in a Medicare Part D plan. For some beneficiaries, Part D constitutes a new opportunity to gain access to drug coverage. For others, Part D replaces the drug coverage they already had under Medicare Advantage, Medigap or Medicaid. A Medigap policy is health insurance sold by private insurers to fill the gaps in traditional Medicare coverage; that is, help defray some of the healthcare costs that Medicare does not cover (Figure 1).
(Enlarge Image)
Figure 1.
Medicare enrollment (in millions). PDP: Prescription drug plan. Source:.[112]
Plans differ in the drugs they cover, the pharmacies they use and the prices they negotiate with drug manufacturers and pharmacies. Additionally, the costs to the enrollee for the monthly premium, the annual deductible, cost-sharing per prescription and conditions of reimbursement vary significantly by plan.
Plans can control the growth in prescription drug spending through the use of formularies. First, plans can encourage patients and physicians to select lower-cost medications, such as generics. Second, plans can negotiate lower prices with drug manufacturers in return for preferred placement of drugs on the formulary. Third, plans can discourage inappropriate use of medications by imposing prior authorization requirements.
Recent studies show plans participating in the Medicare drug benefit currently cover between 70 and 98% of drugs commonly prescribed to Medicare beneficiaries. It has been speculated, however, that early on during the drug benefit's implementation phase some plans would lure enrollment of large numbers of Medicare beneficiaries through lenient formulary design, but that once on board, enrollees would be faced with more restrictions on drug coverage: pejoratively termed 'bait and switch' tactics. Indeed, in the late 2007, the US Centers for Medicare and Medicaid Services (CMS) expressed surprise at the number of requests it has received from Part D plans to remove drugs from formularies, place them on less preferred tiers or impose conditions of reimbursement.
The MMA legislation points to the need for plans to strike a balance between providing beneficiaries with robust drug coverage and containing costs. Because Part D plans face some financial risk for drug costs, in an attempt to avoid adverse selection, they may want to structure their benefit in a way that appeals to low-cost beneficiaries and repels high-cost beneficiaries. Offering limited coverage with a restrictive formulary or strict utilization management, particularly for costly drugs, might discourage beneficiaries from enrolling. One way to mitigate both cherry-picking on the part of plans and adverse selection by beneficiaries is to risk adjust payments so that plans are paid higher premiums for enrollees likely to have high expenditures. Under Part D, CMS risk adjusts payments to plans. Another way to spread risk as effectively as possible is through establishing certain minimum requirements for plan formulary management. One method the federal government uses to ensure adequate coverage comprises sets of rules and regulations that participating plans should abide by. Perhaps the most explicit guidance is the 'all or substantially all' clause with respect to coverage of 75% of the costs of biopharmaceuticals in six broad therapeutic categories: anticonvulsants, antidepressants, antineoplastics, antipsychotics, HIV/AIDS and immunosuppressants. CMS defines the clause 'all or substantially all' as follows: 'substantially all' in this context means that all drugs in these categories are expected to be included in plan formularies. There are a few exceptions to the 'all or substantially all' clause. Medicare drug plans are allowed to exclude from their formularies: gefitinib (a cancer drug); fosphenytoin (an anticonvulsant); and either escitalopram (a selective serotonin reuptake inhibitor antidepressant) or citalopram (another selective serotonin reuptake inhibitor), but not both.
In addition, for newly approved drugs in these categories, CMS's expedited review requirement implies that for drugs launched after 16 April, 2007 plan Pharmacy and Therapeutics committees must make their decisions about a drug's formulary placement within 90 days of a drug's approval, rather than the standard 180-day maximum. And, CMS guidance stipulates that plans must subsidize 75% of the costs of drugs between the deductible and the initial coverage limit of $2400. In 2007, Medicare Part D's defined standard benefit had a $265 deductible and 25% co-insurance up to an initial coverage limit of $2400 in total annual drug costs, followed by a coverage gap (the so-called 'doughnut hole') until enrollees reach $3800 in total drug costs. After costs reach $3600, Medicare pays 95% of drug costs. With the exception of most antiretroviral drugs, patients prescribed one or more drugs in these six categories may be subject to prior authorization, quantity limits and step therapy. There is one exception: enfurvitide must be on all formularies, but prior authorization may be used for first-time users of this antiretroviral.
CMS acknowledges that patients being treated for diseases in these six categories are likely to have some of the highest drug and medical costs among all Medicare beneficiaries. However, CMS asserts that beneficiaries being treated with a drug from one or more of these six categories have special needs for uninterrupted therapies, particularly in light of outcome intervariability across drugs in these categories.
Cost considerations may not be used to determine whether to cover a drug from the six categories listed above. Nevertheless, cost-sharing arrangements and conditions of reimbursement (where sanctioned) may be influenced by cost considerations. Further, CMS explicitly allows plans to remove drugs from formularies at any time based on scientifically demonstrated safety issues. For example, for obvious reasons, plans do not cover drugs that have been withdrawn from the market. Also, plans may exclude from coverage drugs with black-box warnings (BBW); the FDA's strongest warning to physicians and patients that severe adverse reactions have been experienced during the use of a product.
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