New Law Brings Changes to Medicare Part D

JANUARY 01, 2009
Martha M. Rumore, PharmD, JD, LLM, FAPhA, and Robert Colloca, RPh

Dr. Rumore is clinical manager, Drug Information, New York-Presbyterian Hospital, New York, New York. Mr. Colloca is director of Medicare Prescription Programs at EmblemHealth Services Company LLC. EmblemHealth Services Company LLC and New York-Presbyterian Hospital disavow the opinions expressed in the article.

Medicare's Part D prescription drug benefit changed the landscape of prescription drug coverage for millions of older Americans and their health care providers, presenting both a challenge and an opportunity for pharmacists. What has been learned over the 3 years since the program's inception? And how will the recently enacted, wide-ranging Medicare reforms affect pharmacy practice in 2009 and beyond?

Trends Since 2006

In 2006 and 2007, Medicare Part D cost the federal government $47 billion and $49 billion, respectively. Over the next decade, the program is estimated to cost a total of $900 billion. Generic medications comprised 50% of the Part D market in 2006 and now comprise 63%,1 and since 2006, restrictions on utilization management among plans increased from 20% to 30%.2

Dual Eligibles
In July 2008, the House Committee on Oversight and Government Reform reported that Part D drug costs to dual eligibles—those elderly and disabled individuals who qualify for both Medicare and Medicaid and who are required to obtain prescription coverage exclusively through Part D—averaged 30% more than under Medicaid, primarily because manufacturers charge Part D plans 46% more than Medicaid,3 and Part D plans have been unable to obtain significant rebates and discounts on generics.

Similarly, for drugs in the 6 required classes (cancer medications, HIV/AIDS treatments, antidepressants, antipsychotics, immunosuppressants, and anticonvulsive treatments for epilepsy and other conditions), rebates and discounts were found to be less under Part D than for Medicaid. Over the next 10 years, dual eligibles will use $432 billion worth of pharmaceuticals. If Part D paid the same price as Medicaid, total taxpayer savings would reach $156 billion during this period.

Services Moved from Part B to Part D
As a cost-saving measure, some services have moved from outpatient treatment in physicians' offices covered under Part B to the pharmacy benefit under Part D. As mandated by the Tax Relief and Health Care Act, in 2008 most vaccines were moved from Part B to Part D (pneumococcal, influenza, and hepatitis B remain Part B).4 Under Part D, administration fees, dispensing fees (if applicable), and applicable taxes are bundled with the drug cost and have a single patient copay. Currently, home infusion professional service, supplies, and equipment are covered under Medicare Part B, whereas the ingredient costs and dispensing fees are covered under Part D.

Coverage Gaps and Coinsurance
Approximately 25% to 38% of the Medicare population did not have prescription coverage prior to enactment of Part D; currently, about 10% remain without coverage. Yet, since Part D's enactment, the benefit design has changed significantly, with deductibles, placement in the coverage gap (also known as the doughnut hole), catastrophic thresholds, and both brand and generic copays increasing. Additionally, more plans currently charge coinsurance for specialty tier drugs.

Higher drug costs translate to patients reaching the coverage gap earlier today than ever before. Approximately 70% of stand-alone prescription drug plans offer no gap coverage, with 13% offering full generic gap coverage. A Kaiser Family Foundation study recently reported that 23% of patients taking oral diabetic drugs changed their medication use when they reached the gap. Overall, 15% of patients taking drugs in 8 categories stopped treatment once they had to assume the full cost of their prescriptions.5

Changes to the Formulary
The Formulary Reference File, used by Part D plans to submit formularies to the Centers for Medicare & Medicaid Services (CMS) and used by CMS to determine if a plan formulary meets minimum requirements, has gone from 7100 to 5500 drugs. CMS deleted >1500 drugs, including discontinued drugs, unapproved drugs, products with redundant codes, and drugs not reimbursable under the statute. In response, since 2007, Part D plans have dropped many drugs from their formularies. These changes are resulting in increased out-of-pocket costs and patients switching to alternative medications, filing of more requests for exceptions, and changing plans.2

Key MIPPA Part D Provisions

? Physician e-prescribing bonuses
? Prompt payment to pharmacies
? Reduced barriers for low-income beneficiaries
? CMS authority to cover more drugs on plan formularies
? Use of PDE data by agencies, states, and researchers
? Weekly pricing updates to pharmacies
? Changed definition of a Part D drug to conform with Part B

CMS = Centers for Medicare & Medicaid Services; MIPPA = Medicare Improvements for Patients and Providers Act of 2008; PDE = Prescription Drug Event.
Adapted from reference 6.

2009 and Beyond

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) added numerous provisions to Medicare Part D (Table).6

Under the new law, agencies, states, and researchers will be able to use Prescription Drug Event (PDE) data to study drug use in Part D, including utilization, safety, effectiveness, quality, and efficacy of health care services, a provision likely to impact Medication Therapy Management Programs (MTMPs). The percentage of MTMPs using community pharmacists doubled from 2007 to 2008,7 and now that CMS will soon begin to use PDE data, it is anticipated that the agency will require MTMPs to increase their focus on members and superior outcomes. Additionally, pharmacist billing codes for MTMP services have been established.7

Beginning in 2010, MIPPA allows CMS to require coverage of additional categories and classes of drugs based on 2 criteria: (1) major or life-threatening clinical consequences of restricted access, and (2) significant clinical need for individuals to have access to multiple drugs within a category or class due to unique chemical actions and pharmacologic effects of the drugs.8 This provision potentially changes the Part D formulary development process and may result in increased costs for both beneficiaries and government.

Exceptions are available for plans to exclude a particular covered Part D drug or limit access through prior authorization (PA) or utilization management. Any exceptions must be based on scientific evidence and medical standards, however, and must undergo a formal rulemaking process, including a public notice and comment period.

Beginning in 2009, the exception that allowed for PA for antiretroviral therapy has been removed. Part D plans must include on their formulary "all or substantially all" antiretrovirals and cannot employ PA tools for these drugs.9 Additionally, CMS is now requiring plans to include their PA criteria on their formulary Web sites.

Under MIPPA, by 2010, barring extraordinary circumstances, including natural disasters, Part D pharmacy claims (other than mail order and long-term care [LTC]) must be paid within 14 days after electronic submission or within 30 days if submitted by other means. This pertains to clean claims, defined as electronic claims for which the prescription drug plan has not notified the pharmacy of deficiencies, improprieties, or particular circumstances requiring special treatment within 10 days after submission (or 15 days for nonelectronic submissions).

Plans must pay these claims electronically, and late payments are subject to interest equal to the weighted average of interest on 3-month Treasury securities increased by a certain percentage. For pharmacies located in or contracting with LTC facilities, claims must be submitted for reimbursement in not <30 but not >90 days. Pharmacists consider this prompt pay provision important for treating pharmacies fairly and critical for pharmacies with cash flow concerns.

MIPPA requires health plans to update pricing standards used to reimburse pharmacies regularly, based on the drug cost (eg, average wholesale price, wholesalers acquisition cost), and at least weekly thereafter, to reflect market price accurately. The sources used to make regular updates of the drug pricing standard must be provided to pharmacy benefit managers and pharmacies by the plans.

MIPPA also changes the definition of a Part D drug by expanding the compendia used to determine whether a drug is a Part D drug, now basically following the process used for Medicare Part B. Additionally, MIPPA revises the definition of a "medically acceptable indication" for which an off-label use would be covered. Medically acceptable indication would include drugs in anticancer chemotherapeutic regimens consistent with the definition of such drugs under Part B. By 2013, benzodiazepines must be covered, and barbiturates must be covered if used for epilepsy, cancer, or chronic mental health disorders.

In 2008, a class-action lawsuit, Situ v. Leavitt, was settled, now making it easier for dual eligibles and those entitled to the low-income subsidy (LIS) benefit to get prescription drugs under Part D.10 The suit alleged that due to poor CMS management, these groups were not uniformly and properly auto-enrolled in prescription plans if they did not autoenroll themselves, thus excluding many dual eligibles from enrollment in Part D plans. The suit alleged that CMS failed to adequately and uniformly process changes in plan enrollment when dual or LIS eligibles sought to change plans. The settlement requires CMS to streamline the Medicare Part D enrollment process. CMS must also revise its point-ofservice contract to relieve pharmacists of liability for claims filed based on best available evidence of a beneficiary's LIS status that subsequently is found to be erroneous.11,12

CMS continues to issue clarifications and updates to various aspects of the Medicare Prescription Drug Benefit Manual that directly affect the practice of pharmacy. It is crucial for pharmacists, network pharmacies, and Part D plans to comment on and monitor Medicare-proposed legislation, guidance, and regulations.


  1. Pieri S. Medicare Part D-Market Dynamics. 2008.Wolters Kluwer Health Web site.
  2. Hoadley J, Hargrave E, Cubanski J, et al. Medicare Prescription Drug Plans in 2008 and Key Changes Since 2006: Summary of Findings. The Henry J. Kaiser Foundation. April 2008.
  3. Majority Staff. US House of Representatives. Committee on Oversight and Government Reform. Medicare Part D: Drug Pricing and Manufacturer Windfalls. July 2008.
  4. Reimbursement for vaccines and vaccine administration under Medicare Part D. Centers for Medicare & Medicaid Services.
  5. Nearly a Quarter of Diabetic Patients Altered Therapy in Part D Gap-Study. The Pink Sheet. September 1, 2008; 70(35):5.
  6. Public Law 110-275. Medicare Improvements for Patients and Providers Act of 2008.
  7. American Pharmacists Association. APhA Resources: Medicare. Understanding Medicare. What Pharmacists Need to Know. Monograph 4: final regulations for Medicare Part D.
  8. New Medicare Law May Result in CMS Ordering Plans to Cover More Drugs. Medicare Part D Compliance News. August 2008; 3(8):1-4.
  9. Centers for Medicare & Medicaid Services. New Regulations?Revisions to the Medicare Advantage and Prescription Drug Benefit Programs.
  10. Situ v. Leavitt. C06-02841-TEH (N.D. Cal. 2006). Settlement Agreement.
  11. Plans Can Rely on Best Available Evidence to Pay for Unapproved Prescription Drugs. Medicare Part D Compliance News. July 2008; 3(7):1-2.
  12. Tudor C. Center for Medicare & Medicaid Services. Center for Drug and Health Plan Choice. Best Available Evidence Policy-Update [memorandum to Part D sponsors]. August 4, 2008.
Drug Categories Excluded from Medicare Prescription Drug Coverage

? Anorexia
? Weight loss or weight gain
? Fertility
? Cosmetic or lifestyle purposes (eg, hair growth)
? Symptomatic relief of coughs and colds
? Prescription vitamin and mineral products
? Nonprescription drugs
? Barbiturates
? Drug Efficacy Study Implementation Drugs
? Benzodiazepines
? Drugs to treat erectile dysfunction
? Drugs covered under Part A or Part B (immunosuppressive drugs, some oral chemotherapeutics, hemophilia clotting factors, drugs that are not self-administered

Best Available Evidence

These documents can be used by pharmacists to verify a patient's eligibility for Part D's low-income subsidy:

  • Beneficiary's Medicaid card with an eligibility date during a month after June of the previous calendar year
  • State document confirming active Medicaid status during a month after the previous June
  • A printout from a state electronic enrollment file showing Medicaid status during a month after the previous June
  • Other documentation showing Medicaid status during a month after the previous June