Legislative Update: March/April 2022

Part D Plan Sponsors Pocketing Rebates While Consumers Pay More For Prescriptions

By Shannon Benton, Executive Director

Provisions that would reduce the costs of prescription drugs for Medicare beneficiaries remain a part of President Biden’s Build Back Better legislation.  Democrats have been in talks about pulling out certain popular provisions that have some Republican support in an attempt to pass those parts as stand-alone bills.  But so far, that effort remains stalled in the Senate.

In the meantime, the Centers for Medicare and Medicaid Services (CMS) is doing what it can administratively to lower prescription drug costs.  CMS recently issued a proposed rule that it says would lower out-of-pocket prescription drug costs for beneficiaries by requiring pharmacies to pass along all negotiated price concessions, discounts and rebates, to beneficiaries at the point of sale.  According to CMS — this isn’t happening now.

Current regulations give Part D “sponsors” (like Part D and Medicare Advantage plans) significant discretion when deciding whether to include prescription drug rebates and price concessions in the “negotiated” prices they report to CMS.  If a Plan D insurer does choose to include price concessions when they report, then a portion of that rebate must be used to reduce beneficiaries’ costs at the pharmacy.  Instead, CMS says, those price concessions are generally being pocketed by plans — not beneficiaries.

How much Part D enrollees could actually save from this change isn’t clear, but the amount of money at stake is substantial.  CMS estimates that pharmacy price concessions grew from $8.9 million in 2010 to a stunning $9.5 billion in 2020.  In other words, for every dollar in rebates and price concessions that Part D sponsors received in 2010, they are receiving $107,400 today!  If $9.5 billion in rebates were equally divvied up between 50 million Part D recipients, that would be almost $200 in savings per person in one year.

For several years now, TSCL has supported efforts that would re-direct these price concessions and rebates to where they rightfully belong — Medicare beneficiaries.  Regulatory efforts may help somewhat in the short-term, but regulations don’t replace legislation when it comes to bringing down prescription drug prices.

Under current law, Medicare still has no authority to limit annual price increases for prescription drugs covered under Part D, or Part B drugs administered at a doctor’s office.  Medicaid, the low income federal and state healthcare program, on the other hand, does have a rebate system that requires the pharmaceutical manufacturer to provide refunds if prices grow faster than inflation — a proposal that’s supported by 83% of participants in a recent TSCL survey.  This would help slow both rising prescription drug costs at the pharmacy, and potentially slow the rate of increase in Part B premiums as well.

TSCL continues to work for this sort of “rebate” that we feel would help Medicare beneficiaries more easily afford the prescription drugs they need, while keeping more of their Social Security benefits for other budget needs in the long term.

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Source:  “CMS Proposes Changes to Part D Regulations: Pharmacy Price Concessions,” Hassan Shaikh, Mintz, Lexology.com, January 24, 2022.  “CMS Takes Action To Lower Out of Pocket Medicare Part D Prescription Costs,” CMS, January 6, 2022