PhRMA urges CMS to share the savings with seniors

Yesterday, PhRMA submitted comments in response to the Centers for Medicare & Medicaid Services (CMS) Request for Information (RFI) on sharing a portion of manufacturer rebates directly with beneficiaries at the point of sale.   

For over 10 years, Medicare Part D’s success has been built on strong competition among private health plans that work to keep costs low and negotiate with pharmaceutical manufacturers for savings. The Medicare Board of Trustees report that rebates for many brand medicines are “substantial” and that average rebate levels have increased in each year of the program. 

In fact, from 2010 to 2015, these rebates increased nearly 24 percent per year, about twice as fast as total Part D drug costs, with manufacturer rebates accounting for the bulk of that growth. Too often, however, those savings and rebates are not passed on to seniors at the point of sale, leaving millions of beneficiaries facing higher out-of-pocket costs, even when savings from lower premiums are factored in to seniors’ total costs. This has resulted in a system where chronically ill Medicare patients with high drug costs end up subsidizing premiums for healthier enrollees, which is contrary to how health insurance is supposed to work, and which leaves far too many seniors with high out-of-pocket costs.

As part of the RFI, CMS requested comment on requiring Medicare Part D plans to pass through a minimum portion of manufacturer negotiated rebates and discounts to beneficiaries at the point of sale. PhRMA applauds the Administration for exploring options for patients to benefit more directly from discounts and rebates.

PhRMA’s comment letter on the RFI shows how sharing the savings improves affordability for patients, better aligns stakeholder incentives and makes the successful Part D program work even better for millions of seniors and disabled beneficiaries. The comments include new analysis from the actuarial firm Milliman which shows that rebate pass-through could alter market dynamics, strengthening plan incentives in the Part D program and reducing spending for beneficiaries and government alike:

• Over 10 years, shifting rebates to the point of sale could lower out-of-pocket costs for millions of Medicare beneficiaries, saving them between $4B and $28B
• The federal government could save between $8B and $73B over 10 years

Part D has succeeded beyond expectations, delivering affordable prescription drug coverage for more than 40 million seniors and disabled individuals at a lower cost to taxpayers than was originally anticipated.  These changes could lower costs for millions of beneficiaries, generate savings for the federal government and strengthen the already successful Part D program.