The total cost for a single year of treatment with the nation’s most expensive specialty drugs can cost more than the entire retirement savings for many retirees. The annual cost of the cancer drug Idhifa, for example, is $300,858. According to a new study by the non-partisan Kaiser Family Foundation, the median out-of-pocket cost that Medicare Part D beneficiaries will pay out-of-pocket for specialty drugs in 2019 would be $16,551. Patients suffering from multiple sclerosis could pay an estimated out-of-pocket of $7,409 in 2019 for Glatiramer acetate. Even on the “low side,” the annual out-of-pocket for Hepatitis C drug, Zepatier runs $2,622.
The explosive cost of specialty drugs, that offer major treatment advances for people with life-threatening diseases, is not only threatening access to these treatments, but threatens to drain retirement savings, and leave widows and widowers in poverty after the death of a spouse. Unlike Medicare Advantage plans, and health insurance plans covering working-age adults, Medicare Part D has no annual out-of-pocket maximum to protect people with the highest drug costs.
Specialty-tier drugs are defined by Medicare, as those that cost more than $670 per month in 2019, and include drugs used to treat cancer, hepatitis C, multiple sclerosis (MS), and rheumatoid arthritis. Even when Part D enrollees reach the Medicare Part D catastrophic coverage phase, when co-insurance drops to 5%, beneficiaries who take these drugs can continue to face thousands of dollars in annual out-of-pocket costs, according to the Kaiser study. The study found that annual out-of-pocket costs for specialty drugs in 2019 are expected to average $7,994 across the 28 specialty-tier drugs that are covered by drug plans.
Prices like these are not only unaffordable for most Medicare recipients, these costs also place pressure on Medicare’s finances, since Medicare pays 80% of Part D costs during the catastrophic phase of coverage. Although drug plans vary significantly, the 2019 “standard Part D benefit” has a $415 deductible and a 25% co-insurance up to an initial coverage limit of $3,820 in total drug costs. That includes both what consumers and their drug plans pay. Once total costs exceed that amount, beneficiaries hit the Part D “doughnut hole” or coverage gap. Under that stage of coverage, beneficiaries pay 25% coinsurance on the discounted price of brand name drugs, and 37% co-insurance for generics until they have spent a total out-of-pocket of $5,100. At that point beneficiaries enter the catastrophic phase of coverage, but are still on the hook for 5% of the cost of their prescriptions.
President Trump recently released a proposal that could change the way drugs are sold in the U.S. Patients have been forced to pay out-of-pocket costs based on the rising list price of drugs. The proposal would require that often-secretive discounts or rebates, received by pharmacy benefit managers from drug companies, would have to be credited at the pharmacy when a patient fills a prescription. For patients who need expensive drugs, out-of-pocket costs are likely to go down.
But not all beneficiaries will come out ahead. Some treatments have little or no competition, and patients needing those drugs might not see any extra savings. And for people who don’t take pricey drugs, monthly Part D costs are likely to rise because premiums are expected to go up when insurers won’t be able to keep rebates to improve bottom lines.
Several new bills have recently been introduced in Congress that would reduce prescription drug costs. A number of them have bipartisan support. To read more details about these bills see —“Stories About High Drug Costs Lead To Congressional Investigation of Pharmaceutical Pricing.”
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Sources: “The Out-of-Pocket Cost Burden For Specialty Drugs in Medicare Part D in 2019,” Juliette Cubanski, Wyatt Koma, Tricia Neuman, Kaiser Family Foundation, January 2019. https://www.kff.org/medicare/issue-brief/the-out-of-pocket-cost-burden-for-specialty-drugs-in-medicare-part-d-in-2019/ “How Trump’s Latest Plan to Cut Drug Prices Will Affect You,” Katie Thomas and Reed Abelson, The New York Times, February 5, 2019/