New Policy Restricts Medicare Formulary Changes

The Bush administration on Wednesday announced a new policy that requires insurers sponsoring Medicare drug plans to allow enrolled beneficiaries to continue receiving coverage for medications, even if the company drops the drugs from its formulary, the New York Times reports (Pear, New York Times, 4/27).

Under the previous policy, insurers could change formularies as often as they liked, as long as CMS approved the changes. The new policy comes in response to concerns that beneficiaries might select a drug plan because it covers the medications they are taking "only to see their preferred drugs dropped," the Inquirer reports (Sullivan, Philadelphia Inquirer, 4/27).

Some congressional Democrats and Republicans had said that it was not fair to allow drug companies to change their formularies "at will" when beneficiaries are permitted to change plans only once annually, according to the Times.

In a memorandum being sent to insurers, the Bush administration says, "Medicare beneficiaries select Part D plans, in part, based on the formulary that is marketed during annual open enrollment and therefore have a legitimate expectation that they will have continuing access to coverage of the Part D drugs they are using throughout the plan year."

The new policy says, "No beneficiaries will be subject to a discontinuation or reduction in coverage of the drugs they are currently using." It says an insurer can remove a drug from its formulary, increase copayments for a drug or impose new coverage restrictions "only if enrollees currently taking the affected drug are exempt from the formulary change for the remainder of the plan year."

The policy allows some exceptions. For example, an insurer could remove a drug from its formulary if new research shows the drug was unsafe or if a new generic equivalent becomes available, according to the Times (New York Times, 4/27). It is unclear how, if at all, the policy will affect coverage changes in future years, the Philadelphia Inquirer reports.

The policy change comes fewer than three weeks before the May 15 deadline for enrolling in the drug benefit without incurring a financial penalty (Philadelphia Inquirer, 4/27).

CMS Administrator Mark McClellan said, "The stability of drug formularies is extremely important for many of our beneficiaries" (New York Times, 4/27).

CMS spokesperson Peter Ashkenaz said the agency "looked at what would be in the best interest of beneficiaries and that is allowing them to have continued access to drugs" (Philadelphia Inquirer, 4/27).

Karen Ignagni, president and CEO of America's Health Insurance Plans, said AHIP supports the policy, even though "it does not reflect common practice in the private sector." Ignagni said the policy "will have a financial impact" on insurers, but she added that they will "need to balance that with the goal of providing continuity of drug coverage and peace of mind to beneficiaries" (New York Times, 4/27).

Pam Walz, director of the Elderly Law Project at Community Legal Services, said, "This is certainly good news. It'll be a relief to Medicare beneficiaries."

Richard Stefanacci, executive director of the Health Policy Institute at the University of the Sciences, said, "This is probably more of a political move because CMS is gearing up for the final push before the deadline. It's more to say, 'Look what we are doing to safeguard beneficiaries'" (Philadelphia Inquirer, 4/27).

The AP/Long Island Newsday on Thursday examined how some beneficiaries who take medications for cancer or chronic conditions have reached the so-called "doughnut hole" -- the gap in coverage under which beneficiaries are required to pay for 100% of drug costs between $2,250 and $5,100. Beyond $5,100, Medicare will cover 95% of drug costs.

An estimated 6.9 million beneficiaries will experience a gap in coverage at some point in 2006, according to the Kaiser Family Foundation.

McClellan has said that many beneficiaries could avoid the coverage gap by switching from brand-name to generic or other lower-cost medications.

Analysts say most beneficiaries expected to be affected by the coverage gap likely will not reach it until fall (Freking, AP/Long Island Newsday, 4/27).

USA Today on Thursday published two articles examining issues related to the drug benefit. Summaries appear below.

• Drug costs: The article examined recent surveys that find that out-of-pocket drug costs have increased under the drug benefit for about one in five beneficiaries. A recent survey by the Kaiser Family Foundation finds that 55% of enrolled beneficiaries are saving money under the drug benefit, but 19% are spending more and another 19% are spending about the same as before the program. A second survey by KRC Research for the Medicare Rx Education Network finds that 59% of enrolled beneficiaries are saving money, while 23% are not. The surveys "confirm what had been predicted about the program ... : There are millions for whom the plan is increasing drug costs" (Wolf, USA Today, 4/27).
  
  
• Low-income beneficiaries: The article examined the "people that Medicare's new prescription drug program has hurt, rather than helped." USA Today reports that most beneficiaries have saved money under the drug benefit, "[b]ut for others, perhaps about 20%, the much-heralded program has meant higher costs, and in some cases greater pain and more worry." The problem particularly affects low-income beneficiaries taking multiple medications for chronic conditions, USA Today reports (Wolf/Appleby, USA Today, 4/27).