Reference Based Pricing on PDP's

Nov 27, 2008

  1. Bob_The_Insurance_Guy
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    The Annual Enrollment Period (AEP) for Part C and Part D plans, which began on November 15, is the time of the year when all Medicare beneficiaries may change how they receive their prescription drug and other Medicare coverage. This year the Centers for Medicare & Medicaid Services (CMS) is urging all beneficiaries to review their coverage because of the changes made by drug plans to their premiums and benefit packages. CMS encourages beneficiaries to use its Medicare Plan Finder on the Medicare website, www.medicare.gov, to help find the most comprehensive and economical coverage for them.
    According to the Kaiser Family Foundation, the admonition by CMS to review current coverage is worth heeding. More than nine in ten beneficiaries enrolled in prescription drug plans will see their premiums increase in 2009. About half of prescription drug plan enrollees who have not changed plans will have experienced a fifty percent increase in their drug plan premium since Part D began in 2006.[1] Kaiser also points out that, despite the change in plan costs each year, the majority of beneficiaries remain in the same plan rather than change during the AEP.
    Yet some beneficiaries who use the Medicare Plan Finder to choose the lowest cost plan, as CMS suggests, may be in for a surprise when they fill their prescriptions in January. The initial screen from the Plan Finder does not provide detailed information about new pricing schemes that increase the cost of certain brand name drugs substantially. As a result, unwary beneficiaries may find themselves paying significantly more for their brand name prescriptions than they were led to believe by the Plan Finder. What appears to be the lowest cost plan may, in fact, be more costly than other plans that do not use the same pricing mechanism.
    This Weekly Alert will discuss the new pricing mechanism and the difficulties with the Medicare Plan Finder.
    Pricing of Prescription Drugs
    Most prescription drug plans use a multi-tiered cost-sharing structure to encourage use of certain drugs on their formularies. Generic drugs are generally placed on the lowest tier with the lowest cost-sharing amount to encourage their use. Brand name drugs are placed on higher tiers with higher cost sharing amounts.
    In July 2008 CMS issued new guidance that allows drug plans to use "reference-based pricing" for certain formulary drugs, generally brand name drugs with a generic equivalent.[2] Under a reference-based pricing system, the beneficiary pays the tiered cost sharing amount plus an additional amount that supplements the cost-sharing. The additional amount, sometimes referred to as a "product selection penalty," is calculated as the difference between the full price of the brand name drug and the full price of its generic equivalent. Advocates report that at least three national Part D plan sponsors, HealthNet, SilverScript, and Sterling, use reference based pricing in their formularies.
    The penalty can literally add hundreds of dollars to the co-pay stated in the Plan Finder. The following examples are based on information on the Plan Finder for plans in Connecticut:
    Plan: Silverscript Value
    Drug: Cardizem (high blood pressure drug)

    Tier: 3

    Co-pay: $98 (per Plan Finder)

    Full cost: $109.61 (Cardizem)

    Full cost: $17.57 (Diltiazem, generic equivalent)

    Actual cost for $98 drug = ($98) + (109.61 minus $17.57) = $190.04
    Plan: HealthNet Orange 1
    Drug: Arava (disease-modifying rheumatoid arthritis drug)
    Tier: 2
    Co-pay: $44 (per Plan Finder)
    Full cost: $530.23 (Arava)
    Full cost: $33.06 (Leflunomide, generic equivalent)
    Actual cost for $44 drug = ($44) + $530.23 minus 33.06) = $541.17[3]
    Note that two of the plans, HealthNet Orange and Sterling Rx, also require prior authorization before the plan will pay for Arava.
    Finding the Actual Drug Cost
    The Plan Finder does not make information about reference-based pricing readily available. The cost of the penalty is not even considered in the Plan Finder's designation of lowest cost plans, and the initial screen does not mention the possibility of a penalty. Beneficiaries and their helpers who do not go beyond the initial screen, therefore, will not know that the cost of their prescription is more than the Plan Finder indicates. They may choose what appears to be the lowest cost plan without knowing that a penalty may be added to the co-payment for their drugs.[4]
    Beneficiaries who dig deeper on the Plan Finder still will not get sufficient information to assess the true cost of their drugs. Those who go to the Plan Compare screen may discover that their drug bears a footnote, "Footnote 8". Footnote 8 says, "This drug may be subject to supplemental cost-sharing in addition to the price displayed. Please contact the plan for details." This cryptic language provides clues but does not effectively convey the magnitude in the cost differential.
    Plan sponsors that use reference-based pricing must ensure that plan enrollees are made aware of the drugs which are subject to the additional cost-sharing.[5] Yet even beneficiaries who contact their plans still may not know how much their drug will cost. Plan web sites do not include the actual charge for the drug after the penalty is attached. Because drug costs vary by pharmacy, the plans claim that the actual charge cannot be ascertained until the claim is processed. Advocates who have contacted plans to learn about the penalty report that some customer service representatives are unaware that a penalty exists or cannot describe how it works.
    What Can an Advocate Do?
    Medicare beneficiaries, their advocates and other helpers cannot be assured that the information provided to them on the Plan Finder is accurate. They need to drill as deeply as possible into the Plan Finder tool to ascertain whether reference-based pricing and other utilization management tools apply to their prescriptions. They need to check the plan web site and contact the plan customer service line to ascertain how the pricing might work. Even then, they cannot be assured that the plan they believe to be the lowest cost drug plan for them will, in fact, provide the most coverage at the lowest cost.
    Advocates question the legality of the reference-based pricing system. At a minimum, the Plan Finder tool, plan web sites, and plan materials fail to provide beneficiaries with sufficient information to help them make an informed and accurate choice about their prescription drug coverage.
    Congressman Pete Stark (D. California), chairman of the Health Subcommittee of the House Committee on Ways & Means, sent Acting CMS Administrator Kerry Weems a letter detailing problems with the Medicare Plan Finder, including the issue of reference-based pricing. Whether CMS will take any action in response to the letter or in response to complaints by advocates remains to be seen.


     
  2. dandan
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    Get Government out of the process!
     
    dandan, Nov 27, 2008
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  3. RLC
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    Bob, how are you addressing this with your clients?
     
    RLC, Nov 27, 2008
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  4. MedSuppPro
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    At 20 bucks a head am I considered an "other helpers".

    Thanks Bob for the info! Another clear example of our government at work for us!

    I just discovered this week that a major pharmacy is not appearing as a provider for Coventry. We spoke to the head of the pharmacy and he thought this would be worked out prior to 2009. I'm confused as it appears Coventry Advantra Rx is now in bed with Medco.:goofy:
     
  5. insurance0707
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    Great Post, thanks for the heads up! I called Coventry myself about some of the big chains not listed as a preferred pharmacy. It looks like the client can get 30 days supplies at non-preferred pharmacies but not 90 day supplies. I was told this was to encourage them to use the mail order and get the bigger savings. Alot of the PDP plans it looks like might be doing that. When you go to the Plan Finder on Medicare's site you can look at preferred pharmacies, and there doesn't seem to be many of them.
     
  6. Bob_The_Insurance_Guy
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    I have contacted a few folks, and made them aware of the fact that going generic is how the insurance companies, as well as CMS, wants the trend to go.

    All were okay with it. The only fly in the ointment is if there is a brand that has no generic equivalent, or if the generic is formulated so that it may have adverse interaction with other meds.

    In my father's case, he tried to get is pulmanologist to switch him to a generic. The doc refused, because he was not convinced either of the generics would act the same as the brand.

    Now, my dad takes 11 meds, and this one med is the only one that he doesn't take the generic of.

    All we can do, as professionals, is contact our clients, make them aware of this, and keep the lines of communication open. That is why, during OEP, they can switch from like to like. I'm not recommending that, but it is an option, if the case demands.
     
  7. jdeasy
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    They cannot switch their stand alone PDP during OEP.
     
    jdeasy, Nov 27, 2008
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  8. policy doctor
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    Why not? It's like to like.

    But who wants too; esp after reading this article. Things are not what they appear to be, either to the advisor/helper nor the consumer.
     
  9. jdeasy
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    Because CMS says they can't. It doesn't have to have have a reason for them to say a person can or can't do something. But, that is not a new rule. Enrollees have never been able to change their stand alone drug plan to another stand alonde drug plan during OEP unless they qualify for an SEP
     
    jdeasy, Nov 28, 2008
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  10. retread
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    jdeasy is correct... You cannot switch from one PDP to another in the OEP. To do so, you would have to drop the old one to pick up the new one, and this is not allowed.

    Remember, the OEP is for MA plans, not PDPs. The only reason PDPs are involved is because of the pairing with either MA plans or Med Sups. Generally speaking, if a PDP change is not required, it is not allowed in the OEP.

    Remember the ditty that I proposed in another thread:

    "You cannot pick up or drop a PDP during the OEP."

    If you use this as a guide, you should not have to go through all the incantations of the OEP table. Keep it simple.
     
    retread, Nov 28, 2008
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