Paying for Drugs After the Medicare Part D Beneficiary Reaches the Catastrophic Limit: Lessons on Cost Sharing from Other US Policy Partnerships Between Government and Commercial Industry

Research output: Contribution to journalReview article

Abstract

In 2018, the Medicare Part D catastrophic threshold is $5000 in out-of-pocket total drug spending incurred by the beneficiary. Above this, Medicare pays 80%, prescription drug plans (PDPs) pay 15%, and beneficiaries pay a 5% copay. However, recent growth in catastrophic spending is caused by expensive specialty drugs. The 5% copay, on top of out-of-pocket spending, could result in beneficiaries not accessing specialty drugs. To assist beneficiaries, the Medicare Payment Advisory Commission (MedPAC) proposes to eliminate beneficiary catastrophic cost sharing, while PDPs pay 80% and Medicare pays 20%. Our objective was to assess other government cost-sharing approaches and consider how they would affect pharmaceutical access, PDP Part D incentives, and pharmaceutical innovation. We reviewed published literature and government reports on cost sharing between US government divisions or between government and private commercial entities. We discussed their cost-sharing applicability to Part D. We found that the US government has utilized numerous cost-sharing approaches to enhance public–private partnerships. We reviewed four cost-sharing arrangements and their applicability to Medicare: the Byrd-Bond Amendment to the Clean Air Act—Medicare bulk purchases drugs costing $8000 + ; North Atlantic Treaty Organization (NATO)—cost sharing based on high-risk markets; the Ryan White Ryan White Comprehensive AIDS Resources Emergency (CARE) Act—grants to PDPs in high-risk markets and grants to beneficiaries who cannot afford drugs; and the Department of Veterans Affairs—drug price negotiation for expensive drugs. In conclusion, a variety of federal cost-sharing approaches provide precedent for altering PDP cost sharing. The government tends to prefer options that have been tried elsewhere.

Original languageEnglish (US)
Pages (from-to)753-763
Number of pages11
JournalApplied health economics and health policy
Volume16
Issue number6
DOIs
StatePublished - Dec 1 2018

ASJC Scopus subject areas

  • Economics and Econometrics
  • Health Policy

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