Medicare’s Prescription Drug Plan Makeover 

Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version, which is one of many reasons we encourage you to listen to the episode!

Dan Gorenstein: Seniors who rely on expensive drugs have been shelling out thousands of dollars for those drugs every year.

Some patients have cleared out savings and retirement accounts paying for these medications.

Others have simply made the terrible choice to go without the drugs they need.

But that all may soon be changing after Congress passed the Inflation Reduction Act back in August.

The new law caps how much the 48 million seniors enrolled in Medicare’s prescription drug plan will spend each year and forces insurers and drugmakers to pick up more of the tab.

Today, the plan to lower prices for seniors by changing incentives for those big players.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

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DG: Therese Humphrey Ball was out of options.

Therese Humphrey Ball: I mean I’ve never felt desperate, but I felt desperate then.

DG: After months of rationing her multiple sclerosis drug Copaxone, even though she was on Medicare, the 62-year old was down to her last dose.

a former nurse, now on disability, so she knew the risk she was taking as she injected herself that December day back in 2016.

TB: I did it the week before Christmas, which is my birthday. So I said, This is it.

DG: Because of the drug’s high price, Therese was saying goodbye to the medication that had successfully treated her MS for eight years.

TB: I sat down and literally, not like me, I started crying. I thought, this is ridiculous. I cannot let this happen. I didn’t fight for this long to get here.

DG: But here she was making a decision that made no sense choosing to go off all MS drugs.

Left untreated, people with MS can lose control of their body and face significant cognitive decline.

But other medications hadn’t worked well for her and Therese could no longer afford Copaxone.

She was bringing in $5000 a month and Copaxone, by itself, cost six.

TB: It was a huge change. It was huge. And I just figured I’m going to have to accept it because I didn’t have an option. You don’t have an option with this disease.

DG: Therese shook her head that winter day, thinking how the disease and the cost to treat it had been a one-two punch.

MS forced her to retire early from nursing. Her symptoms, leaving her so weak some days she’d fall to the floor or she’d lose her vision trying to write prescriptions.

TB: It devastated me. It truly did.

DG: MS forced her out of her nice Chicago apartment.

TB 1: The worst was for the first two months, no heat…. it was like something you never thought you’d live in. You know?…One bedroom. Four flights up. Elevator worked sometimes.

DG: Teva Pharmaceuticals, the maker of Copaxone, kept hiking the price to nearly six times the cost when Therese first started taking the drug back in 2003.

A charity had been helping Therese manage the cost, but in the fall of 2016 the well had run dry.

By that December, she was out.

TB: It’s almost like somebody punched you in the stomach and you didn’t have any air to catch it…You’re like ok. So then I said to myself, okay, what can you do? I called my neurologist and he says, Well, finish up what you’ve got.

DG: So here she found herself. No more Copaxone. Forced to gamble with her health.

DG: The plan worked about as well as you’d expect when someone stops taking medicine to treat a progressive disease.

First it was her memory.

Names, phone numbers, whole conversations, gone.

Then her muscles. Weak legs. Trouble moving her feet.

It got bad enough, her neurologist prescribed a cheaper drug that would be less effective than Copaxone.

And she continued to decline.

DG: The bottom fell out for Therese about 18 months after her last Copaxone shot.

She went to visit her daughter and grandkids outside Chicago one weekend in the summer of 2018.

TB: I spent the night at my daughter’s house because her husband travels.

DG: Saturday morning, Therese’s grandkids run into her room. Pleading to start their morning routine with Grandma, a pancake breakfast. And she realizes she’s stuck in bed.

TB: I couldn’t get up. So I said to one of the girls, I said, Go get Mom.

DG: Embarrassed for herself and afraid of scaring her grandkids, Therese takes a few deep breaths. She explains the situation in Italian so the kids won’t understand.

TB: You got to get the kids out so that I can start working it, to see how far I can get. That was my worst. Imagine, they see Grandma can’t move.

DG: Her neurologist put her on another drug, Tysabri. A medication that carries the potential for the mother of all side effects – a deadly brain infection.

TB: What do you do? I mean, you want to live. You want to have a life. I mean, you know, I have 16 grandchildren. They all look forward to seeing me.

DG: Therese was treating herself like a lab rat. Trying medicine after medicine.

Watching her health fail because the drug she knew worked was too expensive. She was enraged.

TB: You can’t imagine how mad I was…I have friends in Italy and in Paris and they pay less for their drugs for MS than I do…It is incorrigible to think that in the United States of America, people have to do this. It is not right.

DG: Therese channeled that anger into political action. She was a living statistic – one of some 2.3 million seniors who skipped doses in 2019 because of high drug prices.

She worked with several advocacy groups including the National MS Society and Patients for Affordable Drugs – an organization funded by Arnold Ventures – which also supports Tradeoffs.

In May of 2021, Therese testified on Zoom in front of Congress.

Clip: “I can’t control my disease or change that I have MS, but telling you my story and advocating for lower drug prices is something I can control. I urge you to vote in support of H.R. 3. Patients have waited long enough.”

DG: The drug with the potentially lethal side effect has helped Therese’s health stabilize.

She was strong enough this August to start jumping up and down, screaming after Congress had passed the Inflation Reduction Act.

TB: This is unbelievable. I can’t believe it. And I think I started hugging people…I had like three doctors appointments after that in that week and every one I went into, I said, This is it. I said, You guys, we’re there.

DG: Therese smiles when you ask her if she played a small part in helping pass this new law.

After years of physical and mental decline and advocacy she’s just glad it’s going to be easier for more seniors to afford their drugs.

After the break, how this new law overhauls the Medicare Prescription Drug program known as Part D and shifts the burden of high cost drugs from patients and Medicare to drugmakers and insurers.

MIDROLL

Welcome back.

DG: Today, we’re looking at how Congress has overhauled Medicare’s prescription drug program, better known as Part D through the Inflation Reduction Act.

And what this new law could mean for key groups – patients, drugmakers, insurers and the federal government.

To understand what Congress was trying to fix, a little context

George W. Bush championed the program nearly 20 years ago.

Clip: “With the Medicare Act of 2003, our government is finally bringing prescription drug coverage to the seniors of America.”

DG: Part D officially launched in 2006. A government program that seniors get through private insurers.

Congress made Part D an opportunity too good to pass up, hoping that health insurers would jump into this new market. And they did.

As part of the lure, Medicare agreed to pick up a full 80% of the tab after patients crossed a certain spending threshold. 80%.

But that was then. Now times have changed and drug prices have spiked.

Juliette Cubanski: So It really boils down to a basic problem with the original design of the part D benefit that for both patients and for the Medicare program, the risk is completely open ended.

DG: Juliette Cubanski analyzes Medicare policy for the Kaiser Family Foundation or KFF.

In a nutshell, she says, the Inflation Reduction Act is an attempt to balance those risks. To decrease costs for patients like Therese Humphrey Ball and for Medicare and increase the amount insurance companies and drug makers will pay under this updated Part D.

Juliette will walk us through what that may look like.

So Juliette, let’s start with how the IRA impacts patients. What’s it going to do for people on Medicare?

JC: In 2025, out-of-pocket costs under Part D will be capped at $2,000. And this is a really big deal. Capping drug costs is really the only way to prevent more and more people from falling into this trap where, you know, their doctor prescribes them a drug that will treat whatever illness they have but they can’t afford it. So they leave the pharmacy without the drug that their doctor prescribed.

DG: You guys at KFF estimate that the cap will help at least 1.4 million people. That’s the number of folks who shelled out more than $2,000 dollars for drugs in 2020.

That’s obviously huge for those people, but they make up only 2 percent of all those who have Medicare Part D.

Juliette, what about all the seniors who spend much less on drugs? Does this law do anything for them?

JC: [So] We’re all one scary diagnosis away from needing expensive drugs. Even those of us who are healthy today could fall ill tomorrow or next year or the year after that…It offers us what insurance should offer us, which is the peace of mind, in knowing that we won’t have to go bankrupt or into serious medical debt in order to afford health care treatment.

DG: A federal report found in 2019 more than two million seniors skipped medicines because of cost. In theory, this spending limit will fix this problem and give seniors more predictability.

Juliette, with this new cap, you could easily see demand shooting up for products right. Could this be some big windfall moment for drug makers – a key player here in the Part D program?

JC: Drug manufacturers love the cap as you note, making drugs more affordable for patients…So I think we can expect to see higher use and spending, which will translate into more revenue for manufacturers. But there are other provisions of the law…that attempt to address rising drug prices….And that could decrease revenue for drug manufacturers.

DG: Yeah, so with the new law Congress is trying to discourage drugmakers from raising prices by requiring them to put some skin in the game.

As of right now, once older Americans reach a certain spending threshold pharmaceutical companies are not required to offer discounts on their drugs. But in 2025, they’re going to have to. That’s their skin in the game.

Let’s use my mom who’s on Medicare as an example. Now, once she spends more than $2,000 dollars on her prescriptions, she’s off the hook. For any spending above that drugmakers, insurers and the government will pay the rest. Drugmakers will be responsible for a 20 percent discount on each drug. So the more drug manufacturers raise prices, the more their costs increase. Is that right?

JC: That’s right…manufacturers will…be on the hook for the high drug prices that they charge… It’s hoped that will give manufacturers an incentive to curb drug prices or price growth in the future…I think manufacturers always have an incentive to keep prices high…because, you know, the higher their prices, the more money they get. [But] they now have exposure.

DG: That’s a lot. So let me make sure I’ve got it.

The provision you’re mentioning here is that by making drug companies give a discount off the sticker price, Congress is hoping to dissuade them from raising prices so fast?

JC: That’s right.

DG: On top of that, the Inflation Reduction Act gives Medicare the power to negotiate prices, and penalize drugmakers for hiking them faster than inflation.

These and other parts of the law are attempting to shield patients while shifting more of the costs to drugmakers and insurers.

Of course, Juliette, we know the best laid plans rarely work out in health care as intended.

In the past these players usually find ways to benefit, sometimes at the expense of patients.

Staying with the example of my mom. Once she hits that $2,000 bucks, health insurance companies will be responsible for 60 percent of the costs, or 60 percent of the pie, Juliette.

That’s a slice four times as big as insurers are eating or paying now.

What do you think insurers will try to keep their costs as low as possible?

JC: Insurers have a few tools at their disposal…One is their ability to negotiate, press harder for steeper price discounts with drug manufacturers.

DG: That sounds like a good deal for them and Medicare. What other tools do they have?

JC: Another, I think, more important tool is the formulary or the list of drugs that insurers cover. So we could see them covering fewer medications or putting more medications on these so called tiers where beneficiaries have to pay higher out-of-pocket costs.

DG: The drug formulary you mention, is the list of drugs an insurer will pay for. They effectively rank drugs making some less expensive and others a lot more expensive for patients.

So one way insurers could try to save money is restricting the number of drugs they’re willing to cover for a single disease. So someone like Therese could end up paying a lot out of pocket for her Copaxone.

Juliette, it sounds like some seniors on Part D could actually end up with a major access problem.

JC: Yeah, absolutely…Insurers do have to follow certain rules that Medicare sets in terms of how limited their coverage can be…But I think until now, we haven’t really had to worry that much that insurers would bump up against those limits…So I do think that could be one of the key trade offs here. Medicare beneficiaries overall, they’re getting a much better benefit…but in turn, they might be giving up easy access to generous formularies….and whether you think that trade off is worth it might come down to whether you’ve ever walked out of a pharmacy without a medication…because you couldn’t afford it.

DG: Based on our conversation it sounds like drugmakers and insurers are arguably going to have to spend more money and they are sort of the losers here. And consumers are the big winners, along with the federal government which will now only be responsible for a 20 percent of patients costs above that $2,000 dollar cap.

But Juliette, as we were saying, drugmakers and insurers work really hard to make sure they don’t lose. How could you see this going sideways?

JC: One potential consequence that I think everyone will be on the lookout for is higher launch prices for new medications….They may seek to make up for lost revenue by bringing new drugs to market at higher prices than they otherwise would have…In ten years we’ll have a lot more expensive new drugs than we do today. But how much higher as a result of…the changes in the Inflation Reduction Act? I don’t think anyone will be able to answer that question.

DG: Juliette, thanks so much for taking the time to talk to us on Tradeoffs.

JC: Thank you. Very happy to do it.

DG: Many of the reforms Juliette mentioned, including the cap on patient drug spending start in 2025.

Therese Humprehy Ball is counting down the days. That new cap could mean she can finally restart Copaxone.

TB: That’s what I’m looking forward to. That I know the medicines I need will be there for me and I don’t have to hoard anymore and I don’t have to worry about it.

DG: Predictability. It’s something she’s sought out since her diagnosis back in 2003.

And while the cap will likely bring some peace of mind to Therese and millions of other seniors, they could face new challenges like skimpier benefits as insurers look to limit losses. Or higher monthly premiums as drugmakers look to limit losses by jacking up prices.

I’m Dan Gorenstein. This is Tradeoffs.