TL/DR –
The Inflation Reduction Act of 2022 (IRA) established several key changes to the Medicare Part D plan, which will go into effect in 2025. These changes include eliminating the coverage gap, adjusting the share of Medicare Part D drug costs paid by beneficiaries, plans, drug manufacturers, and CMS, capping out-of-pocket costs at $2,000, altering the calculation of True Out-Of-Pocket Costs (TrOOP), and implementing a Medicare Discount Program. The impacts of these changes will be significant for Part D plan sponsors, beneficiaries, and manufacturers, potentially resulting in altered premiums, formulary adjustments, and financial risk shifts.
Inflation Reduction Act of 2022 (IRA) and Medicare Costs
The enactment of the Inflation Reduction Act of 2022 (IRA) represents a landmark in Congress’s bid to mitigate escalating health care expenses. The IRA seeks to curb Medicare expenditure and reduce the cost of prescription drugs at the point-of-sale for Medicare beneficiaries. However, the redesigned Medicare Part D program’s application has triggered a chain of implications for Medicare Part D plan sponsors (“PDPs”), beneficiaries, and manufacturers.
2025 Part D Redesign Overview
The IRA will introduce changes to the standard Part D benefit design and other program components effective from January 1, 2025. Significant alterations include the elimination of the coverage gap, changes in the division of Medicare Part D drug costs, capping out-of-pocket costs, amendment of the True Out-Of-Pocket Costs (TrOOP) calculation, the implementation of the Medicare Discount Program, and reinsurance modifications.
Provided in the CMS Fact Sheet on Final CY 2025 Part D Redesign Program Instructions, is a visual representation comparing the 2025 cost sharing to preceding years.
Impacts on PDPs
On June 3, 2024, PDPs submitted their bids for contract year 2025, considering the new benefits from the IRA. The impact on PDPs was highlighted in many comments that CMS responded to as part of its Final Calendar Year Part D Redesign Program Instructions.
However, limitations imposed by the IRA and market competition could compel PDPs to mitigate the effect of their new financial risk by adjusting formularies.
Impacts on Beneficiaries
The effects on beneficiaries will be mixed with concerns surrounding potential premium increment due to greater coverage. On one hand, beneficiaries are likely to experience lowered point-of-sale cost shares as PDPs may favor more affordable drugs on formularies. On the contrary, PDPs could apply more utilization management tools due to their increased financial risks.
Impacts on Manufacturers
The repercussions of all Part D benefit design amendments on Selected Drugs will probably produce disparate outcomes for manufacturers due to their diversity. The new Medicare Discount Program may be welcomed by some brand drug manufacturers, but the actual impact will vary for each manufacturer. The introduction of the out-of-pocket maximum and potential changes stimulated by the Part D benefit redesign could significantly impact manufacturers.
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