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?

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