Median cumulative increase in prerebate (list) drug prices for Medicare is compared with inflation (based on the Consumer Price Index for All Urban Consumers [CPI-U]). Error bars indicate interquartile ranges. Transplant refers to immunosuppressants for transplant patients.
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Hwang TJ, Dusetzina SB, Feng J, Maini L, Kesselheim AS. Price Increases of Protected-Class Drugs in Medicare Part D, Relative to Inflation, 2012-2017. JAMA. 2019;322(3):267–269. doi:10.1001/jama.2019.7521
In recent years, the Centers for Medicare & Medicaid Services (CMS) has considered allowing greater flexibility in excluding coverage by Medicare Part D for drugs in 6 currently “protected” classes: antineoplastics, antiretrovirals, antidepressants, antipsychotics, anticonvulsants, and immunosuppressants for transplant patients.1 CMS and insurers have argued that the protected-class policy requiring coverage for essentially all drugs—which does not apply to commercial payers—hinders effective price negotiations by Medicare Part D plans and contributes to rising prescription drug costs.1,2
The most recent proposed rule change, issued by the CMS in November 2018, would have permitted brand-name protected-class drugs to be excluded from Medicare Part D plan formularies if list price increases in the previous 3 years outpaced inflation. To assess this proposal’s potential scope, we examined the proportion of protected-class drugs with price increases exceeding inflation. We also compared the proportion of protected-class drugs currently excluded by Medicare Part D plans vs commercial insurers.
Total and per-unit Medicare spending was obtained for brand-name protected-class drugs for the period 2012 to 2017 (most recent year of data available) using the CMS Drug Data files.3 Generic drugs, biosimilars, and noninnovator products were excluded. To allow at least 1 year of price history, we also excluded drugs first marketed after 2016.
For each drug, we compared median changes over 1, 3, and 5 years in Medicare’s prerebate prices per dosage unit vs inflation, defined in the CMS proposed rule as the Consumer Price Index for All Urban Consumers. We assessed the proportion of Medicare Part D vs commercial and Affordable Care Act (ACA) marketplace plans excluding coverage of protected-class drugs, using formulary data from the CMS prescription drug plan formulary files and from MMIT, a pharmacy advisory company with data covering more than 98% of commercially insured lives, as of December 2018.4 Although the CMS proposed rule focused on list price increases, in sensitivity analyses, we also compared net price (after rebates and discounts) changes vs inflation using drug-specific estimates from SSR Health (an investment research firm for which rebate estimates were available for 98 of 143 [69%] drugs).5 Descriptive statistics were calculated using Stata version 12.0 (StataCorp).
There were 143 brand-name protected-class drugs, of which most were antineoplastics (82 [57.3%]), antiretrovirals (28 [19.6%]), and anticonvulsants (13 [9.1%]). Prerebate prices for 126 (88.1%) protected-class drugs increased faster than inflation over the 1-year period (2016-2017), with a median increase of 8.3% (interquartile range [IQR], 5.4%-10.5%) compared with an inflation rate of 2.1% (Table). Similarly, among 80 drugs with available prices for the 5-year period (2012-2017), 75 (93.8%) had prerebate price increases exceeding inflation (median increase, 40.3% [IQR, 28.5%-63.6%]) vs a cumulative increase in inflation of 6.8%. Median prerebate price increases were greatest for anticonvulsants, antipsychotics, and antidepressants (Figure). In sensitivity analyses, after accounting for estimated rebates and discounts, the net price increase for 77.6% of protected-class drugs still exceeded inflation over the 1-year period (2016-2017) with a median increase of 5.6% (IQR, 2.8%-10.8%), and the net price increase for 92.7% of protected-class drugs still exceeded inflation over the 5-year period (2012-2017) with a median increase of 36.5% (IQR, 22.4%-60.0%). In 2018, median exclusions of protected-class drugs were 0% by Medicare Part D plans, compared with 3.6% (IQR, 0.7%-4.3%) by commercial plans and 20.3% (IQR, 10.1%-27.5%) by ACA marketplace plans.
Under current drug pricing trends, nearly all protected-class drugs could be excluded by Medicare Part D plans under the proposed rule. Compared with Medicare Part D plans, a greater proportion of commercial and ACA marketplace plans excluded protected-class drugs. A limitation is using actual prices; it is unclear to what extent any policy changes may encourage companies to restrain future price increases. Although a sensitivity analysis using net prices from a widely cited industry database yielded substantively similar results, final incurred net costs in Medicare Part D are confidential and may differ from these estimates.
The protected-classes policy is controversial, and changes to it have been delayed by both the Obama and the Trump administrations. Although reforming this policy may generate cost savings for the Medicare program, the potential effects of this rule on patient access and outcomes should be carefully considered.
Accepted for Publication: May 14, 2019.
Corresponding Author: Aaron S. Kesselheim, MD, JD, MPH, Program on Regulation, Therapeutics, and Law (PORTAL), Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital, Harvard Medical School, 1620 Tremont St, Ste 3030, Boston, MA 02120 (email@example.com).
Author Contributions: Mr Hwang had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: Hwang, Dusetzina, Kesselheim.
Acquisition, analysis, or interpretation of data: All authors.
Drafting of the manuscript: Hwang, Dusetzina.
Critical revision of the manuscript for important intellectual content: All authors.
Statistical analysis: Hwang, Dusetzina, Feng, Maini.
Obtained funding: Dusetzina, Kesselheim.
Conflict of Interest Disclosures: Mr Hwang reports prior employment by Blackstone and Bain Capital, which has invested in health care companies. Dr Dusetzina reports membership on the Institute for Clinical and Economic Review (ICER) Midwest Comparative Effectiveness Public Advisory Council and serving on the National Academy of Sciences, Engineering, and Medicine “Ensuring Patient Access to Affordable Drug Therapies” committee and receipt of unrelated grants from the Commonwealth Fund, the Leukemia and Lymphoma Society, and the Laura and John Arnold Foundation. Dr Kesselheim reports receipt of an honorarium for a talk at CVS Caremark and unrelated grants from the FDA Office of Generic Drugs and Division of Health Communication. No other disclosures were reported.
Funding/Support: Dr Feng was supported by a grant from the National Institute on Aging (T32-AG000186). Dr Kesselheim was supported by grants from Arnold Ventures, Engelberg Foundation, and the Harvard-MIT Center for Regulatory Science.
Role of the Funder/Sponsor: The authors’ employers, grantors, and funders had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.