Medicare Part D "Castrophic" Abuse

Health Insurer/PBMs NOT Covering their Share of High-Cost "Specialty" Drugs

Since Part D began, Pharma/PBM collusion has led to massive U.S. "specialty" drug prices
- Cancer
- Multiple Sclerosis
- Rheumatoid Arthritis/Immunology
- Neurology
- Orphan/Rare Diseases
- Many Others

U.S. "specialty" drugs now routinely cost in the $100,000 to 300,000 or more per patient per year range
- "Specialty" drug prices are often most extreme for cancer drugs, which are mostly used by seniors in Medicare Part D

These high-cost "specialty" drugs now account for 40-50% of U.S. drug spending and all growth since Part D began

In Part D, the dominant PBMs/plan sponsors are supposed to cover 15% of all drugs costs above a modest annual limit for each patient
- In Part D, the four dominant PBMs also serve as the plan sponsor (i.e., insurance company) and specialty pharmacy for 80-90% of Part D plans
- The 15% exposure is to be paid directly by the PBM/plan sponsor to the pharma company
- The 15% PBM/plan sponsor cost-sharing was designed to incentivize PBMs/plan sponsors to legitimately negotiate Part D "specialty" drug prices with drug manufacturers on behalf of patients and taxpayers

The annual Part D "Catastrophic" Threshold was only $5,000 in 2018, up from $3,600 at the 2006 start of the program
- With an average monthly drug costs in the $5,000-20,000 range, Part D "specialty" drug patients now pass this low annual threshold in the first month or so of each year
- Leading to severe "specialty" drug cost-sharing exposure for the dominant PBMs in Medicare Part D
- "Catastrophic" spending on high-cost beneficiaries has driven most Part D spending growth in recent years

It is NOT mathematically possible that the dominant PBMs are covering their 15% share of Part D "Catastrophic" costs for most high-cost patients
- The PBMs' 15% share of drug costs is MORE than "fees" PBMs get from drug manufacturers (typically in the 4-10% range)
  - Secret "pharma fees" are the overwhelming source of income for the dominant PBMs in Part D
  - If they were paying the 15% as required, the PBMs would be losing a lot of money on almost all high-cost Part D "specialty" drug patients
    - Clearly not happening, given the massive profit growth (with Part D as a central driver) for the dominant health insurer/PBMs in recent years

Their drug manufacturer "partners" are often NOT collecting the 15% "Catastrophic" cost-sharing from the dominant PBMs
- How is that possible?
  - Shockingly, the Government does not appear to require direct reporting of the PBM's 15% Part D cost-sharing by either the PBMs or drug manufacturers
  - Despite the 15% PBM/plan sponsor exposure being the main Part D "specialty" drug negotiating incentive

Imagine if your own health plan did not keep records of your deductibles, co-pays and other cost-sharing responsibilities?
- Wouldn't that be nice
- Hard to imagine, isn't it?

After a decade-plus of massive drug price inflation, the "Catastrophic" abuse for many Part D "specialty" drugs may now far exceed the "pharma fee" abuse
- Unfortunately, the Department of Justice (DOJ) repeatedly admitted that it did not investigate the detailed allegations of Part D "Catastrophic" abuse in the Whistleblower complaints
- Link to the SDNY Whistleblower Complaint discussion of Part D "Catastrophic" abuse
- Link to the D-RI Whistleblower Complaint discussion of "Catastrophic" abuse
- Link to John R. Borzilleri, M.D.'s Court Affidavit discussing Department of Justice admissions of failure to investigation key aspects of the Whistleblower allegations and evidence