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Medicare Monday: Another example of the competitive market at work in Part D

Nicole Longo
Nicole Longo April 17, 2017

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Hepatitis C is a devastating viral disease that can result in life-threatening and costly complications. Five years ago, the only available treatment for the disease often resulted in debilitating side effects and only cured half of patients – but thanks to new cures, cure rates have skyrocketed to upwards of 90 percent. Many patients are able to access these lifesaving medicines through the Medicare Part D program.

While we have seen false claims that spending on groundbreaking hepatitis C treatments would prove unsustainable for Medicare, evidence shows that the competitive structure of Part D has worked to keep costs low for beneficiaries and taxpayers.  

To account for spending trends over time, each year the Centers for Medicare & Medicaid Services (CMS) updates the Part D benefit parameters, such as deductibles, initial coverage limit and the out-of-pocket threshold, for the standard Medicare Part D drug benefit. These parameters are updated based on the Part D annual percentage increase (API) in average per capita expenditures for Part D covered drugs each year. For 2018, Part D parameters will increase by just 1.22 percent, a very modest increase when compared to the 2017 increase of 11.75 percent.

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What does this significant change mean? The higher annual percentage increase in the last couple years was attributed in part to the availability of new hepatitis C treatments. But the competitive market works to keep costs down: As more hepatitis C treatments entered the market, competition among plans and strong negotiation in Part D drove costs for the medicines down, bringing the annual percentage increase in Part D parameters back down to levels in line with previous years.

The competitive market-based dynamic in Part D is a key reason why negotiated prices for hepatitis C medicines in the United States are often lower than in many European countries, according to an IMS Institute for Healthcare Informatics report. As we’ve talked about before, Part D fosters robust negotiation between plans and manufacturers for discounts and rebates on medicines.

Visit PhRMA.org/PartD to learn more about how Medicare Part D helps ensure that patients have affordable access to needed prescription medications.

Topics: Part D, Medicare, Medicare Monday, Hepatitis C