New Law Brings Changes to Medicare Part D

Pharmacy Times
Volume 0

An overview of the landmark Medicare Part D program 3 years since its inception, with guidance for pharmacists on how new provisions in the 2008 Medicare Act will affect their practice.

Dr. Rumore is clinical manager, DrugInformation, New York-PresbyterianHospital, New York, New York.Mr. Colloca is director of MedicarePrescription Programs at EmblemHealthServices Company LLC. EmblemHealthServices Company LLC and New York-Presbyterian Hospital disavow the opinionsexpressed in the article.

Medicare's Part D prescriptiondrug benefit changedthe landscape of prescriptiondrug coverage for millions ofolder Americans and their health careproviders, presenting both a challengeand an opportunity for pharmacists.What has been learned overthe 3 years since the program's inception?And how will the recently enacted,wide-ranging Medicare reformsaffect pharmacy practice in 2009 andbeyond?

Trends Since 2006

In 2006 and 2007, Medicare Part D costthe federal government $47 billion and$49 billion, respectively. Over the nextdecade, the program is estimated to costa total of $900 billion. Generic medicationscomprised 50% of the Part D marketin 2006 and now comprise 63%,1 andsince 2006, restrictions on utilizationmanagement among plans increasedfrom 20% to 30%.2

Dual Eligibles

In July 2008, the House Committee onOversight and Government Reform reportedthat Part D drug costs to dual eligibles—those elderly and disabled individualswho qualify for both Medicareand Medicaid and who are required toobtain prescription coverage exclusivelythrough Part D—averaged 30% morethan under Medicaid, primarily becausemanufacturers charge Part D plans 46%more than Medicaid,3 and Part D planshave been unable to obtain significantrebates and discounts on generics.

Similarly, for drugs in the 6 requiredclasses (cancer medications, HIV/AIDStreatments, antidepressants, antipsychotics,immunosuppressants, and anticonvulsivetreatments for epilepsy andother conditions), rebates and discountswere found to be less under Part D thanfor Medicaid. Over the next 10 years,dual eligibles will use $432 billion worthof pharmaceuticals. If Part D paid thesame price as Medicaid, total taxpayersavings would reach $156 billion duringthis period.

Services Moved from Part B toPart D

As a cost-saving measure, some serviceshave moved from outpatient treatmentin physicians' offices covered underPart B to the pharmacy benefit underPart D. As mandated by the Tax Reliefand Health Care Act, in 2008 most vaccineswere moved from Part B to Part D(pneumococcal, influenza, and hepatitisB remain Part B).4 Under Part D, administrationfees, dispensing fees (if applicable),and applicable taxes are bundledwith the drug cost and have a singlepatient copay. Currently, home infusionprofessional service, supplies, andequipment are covered under MedicarePart B, whereas the ingredient costsand dispensing fees are covered underPart D.

Coverage Gaps and Coinsurance

Approximately 25% to 38% of theMedicare population did not have prescriptioncoverage prior to enactmentof Part D; currently, about 10% remainwithout coverage. Yet, since Part D'senactment, the benefit design haschanged significantly, with deductibles,placement in the coverage gap (alsoknown as the doughnut hole), catastrophicthresholds, and both brand andgeneric copays increasing. Additionally,more plans currently charge coinsurancefor specialty tier drugs.

Higher drug costs translate to patientsreaching the coverage gap earlier todaythan ever before. Approximately 70%of stand-alone prescription drug plansoffer no gap coverage, with 13% offeringfull generic gap coverage. A KaiserFamily Foundation study recentlyreported that 23% of patients taking oraldiabetic drugs changed their medicationuse when they reached the gap.Overall, 15% of patients taking drugsin 8 categories stopped treatment oncethey had to assume the full cost of theirprescriptions.5

Changes to the Formulary

The Formulary Reference File, used byPart D plans to submit formularies tothe Centers for Medicare & MedicaidServices (CMS) and used by CMS todetermine if a plan formulary meetsminimum requirements, has gone from7100 to 5500 drugs. CMS deleted >1500drugs, including discontinued drugs,unapproved drugs, products with redundantcodes, and drugs not reimbursableunder the statute. In response, since2007, Part D plans have dropped manydrugs from their formularies. Thesechanges are resulting in increased out-of-pocket costs and patients switchingto alternative medications, filingof more requests for exceptions, andchanging 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 Patientsand Providers Act of 2008 (MIPPA)added numerous provisions to MedicarePart D (Table).6

Under the new law, agencies, states,and researchers will be able to usePrescription Drug Event (PDE) data tostudy drug use in Part D, including utilization,safety, effectiveness, quality, andefficacy of health care services, a provisionlikely to impact Medication TherapyManagement Programs (MTMPs). Thepercentage of MTMPs using communitypharmacists doubled from 2007 to 2008,7and now that CMS will soon begin touse PDE data, it is anticipated that theagency will require MTMPs to increasetheir focus on members and superioroutcomes. Additionally, pharmacist billingcodes for MTMP services have beenestablished.7

Beginning in 2010, MIPPA allowsCMS to require coverage of additionalcategories and classes of drugs basedon 2 criteria: (1) major or life-threateningclinical consequences of restrictedaccess, and (2) significant clinical needfor individuals to have access to multipledrugs within a category or classdue to unique chemical actions andpharmacologic effects of the drugs.8This provision potentially changes thePart D formulary development processand may result in increased costs forboth beneficiaries and government.

Exceptions are available for plansto exclude a particular covered Part Ddrug or limit access through prior authorization(PA) or utilization management.Any exceptions must be based on scientificevidence and medical standards,however, and must undergo a formalrulemaking process, including a publicnotice and comment period.

Beginning in 2009, the exception thatallowed for PA for antiretroviral therapyhas been removed. Part D plans mustinclude on their formulary "all or substantiallyall" antiretrovirals and cannotemploy PA tools for these drugs.9Additionally, CMS is now requiringplans to include their PA criteria ontheir formulary Web sites.

Under MIPPA, by 2010, barring extraordinarycircumstances, including naturaldisasters, Part D pharmacy claims(other than mail order and long-termcare [LTC]) must be paid within 14 daysafter electronic submission or within30 days if submitted by other means.This pertains to clean claims, definedas electronic claims for which the prescriptiondrug plan has not notified thepharmacy of deficiencies, improprieties,or particular circumstances requiringspecial treatment within 10 days aftersubmission (or 15 days for nonelectronicsubmissions).

Plans must pay these claims electronically,and late payments are subjectto interest equal to the weighted averageof interest on 3-month Treasury securitiesincreased by a certain percentage.For pharmacies located in or contractingwith LTC facilities, claims must besubmitted for reimbursement in not <30but not >90 days. Pharmacists considerthis prompt pay provision important fortreating pharmacies fairly and criticalfor pharmacies with cash flow concerns.

MIPPA requires health plans to updatepricing standards used to reimbursepharmacies regularly, based on thedrug cost (eg, average wholesale price,wholesalers acquisition cost), and atleast weekly thereafter, to reflect marketprice accurately. The sources usedto make regular updates of the drugpricing standard must be provided topharmacy benefit managers and pharmaciesby the plans.

MIPPA also changes the definition ofa Part D drug by expanding the compendiaused to determine whether a drug isa Part D drug, now basically followingthe process used for Medicare Part B.Additionally, MIPPA revises the definitionof a "medically acceptable indication"for which an off-label use would becovered. Medically acceptable indicationwould include drugs in anticancerchemotherapeutic regimens consistentwith the definition of such drugs underPart B. By 2013, benzodiazepines mustbe covered, and barbiturates must becovered if used for epilepsy, cancer, orchronic mental health disorders.

In 2008, a class-action lawsuit, Situ v. Leavitt, was settled, now making it easierfor dual eligibles and those entitledto the low-income subsidy (LIS) benefitto get prescription drugs under Part D.10The suit alleged that due to poor CMSmanagement, these groups were notuniformly and properly auto-enrolled inprescription plans if they did not autoenrollthemselves, thus excluding manydual eligibles from enrollment in Part Dplans. The suit alleged that CMS failedto adequately and uniformly processchanges in plan enrollment when dualor LIS eligibles sought to change plans.The settlement requires CMS to streamlinethe Medicare Part D enrollment process.CMS must also revise its point-ofservicecontract to relieve pharmacistsof liability for claims filed based on bestavailable evidence of a beneficiary's LISstatus that subsequently is found to beerroneous.11,12

CMS continues to issue clarificationsand updates to various aspects of theMedicare Prescription Drug BenefitManual that directly affect the practiceof pharmacy. It is crucial for pharmacists,network pharmacies, and PartD plans to comment on and monitorMedicare-proposed legislation, guidance,and regulations.


  • Pieri S. Medicare Part D-Market Dynamics. 2008.Wolters Kluwer Health Web site.
  • 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.
  • Majority Staff. US House of Representatives. Committee on Oversight and Government Reform. Medicare Part D: Drug Pricing and Manufacturer Windfalls. July 2008.
  • Reimbursement for vaccines and vaccine administration under Medicare Part D. Centers for Medicare & Medicaid Services.
  • Nearly a Quarter of Diabetic Patients Altered Therapy in Part D Gap-Study. The Pink Sheet. September 1, 2008; 70(35):5.
  • Public Law 110-275. Medicare Improvements for Patients and Providers Act of 2008.
  • American Pharmacists Association. APhA Resources: Medicare. Understanding Medicare. What Pharmacists Need to Know. Monograph 4: final regulations for Medicare Part D.
  • New Medicare Law May Result in CMS Ordering Plans to Cover More Drugs. Medicare Part D Compliance News. August 2008; 3(8):1-4.
  • Centers for Medicare & Medicaid Services. New Regulations?Revisions to the Medicare Advantage and Prescription Drug Benefit Programs.
  • Situ v. Leavitt. C06-02841-TEH (N.D. Cal. 2006). Settlement Agreement.
  • Plans Can Rely on Best Available Evidence to Pay for Unapproved Prescription Drugs. Medicare Part D Compliance News. July 2008; 3(7):1-2.
  • 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 Excludedfrom Medicare PrescriptionDrug 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

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