Manufacturers will pay first with new Part D insulin copay limit

Erin McCallister Senior Manager, Health Research Institute, PwC US June 04, 2020

On May 26, CMS announced that over 1,750 stand-alone Medicare Part D and Medicare Advantage plans with prescription drug coverage have applied to offer lower insulin costs through the Part D Senior Savings Model for the 2021 plan year. Participating plans have agreed to cap monthly insulin copays at $35. They’ll offer a range of options, including rapid- and long-acting formulations as well as pen and vial dosage forms.

CMS announced the Senior Savings Model in March as a voluntary offering and solicited plans and manufacturers to participate. Previously, Medicare plans offered lower copays but at the cost of higher premiums. In addition, rule 1860D-14A(C)(2) of the Social Security Act, known as the Special Rule for Supplemental Benefits, required that supplemental benefits be used to cover the costs of prescription drugs before any other discounts or rebates were applied.

“The applicable beneficiary shall not be provided a discounted price for an applicable drug under this section until after such supplemental benefits have been applied with respect to the applicable drug,” the rule states.

This rule meant that when Medicare beneficiaries entered the coverage gap, where manufacturers pay a 70% rebate on the drug costs, that rebate calculation and amount were applied after the supplemental benefits. Additionally, patient copays often increased when they were in the coverage gap.

According to CMS, insulin copays during the coverage gap averaged $125 per month compared with $40 to $50 during the initial coverage phase and $35 or less during the catastrophic phase. The fluctuations can “lead to beneficiaries not being able to afford their medicine or resorting to medication rationing, resulting in worse health outcomes over time,” CMS said in a statement announcing the new plan option.

Under the new voluntary program, CMS has issued a waiver to the rule where manufacturers will pay the full coverage gap discount of 70% before the supplemental benefits are applied. CMS estimates that beneficiaries who use insulin and choose a plan that participates in the model would see an average savings of $446 per year or 66% out-of-pocket savings; participating manufacturers will pay an estimated $250 million more over five years. Three insulin manufacturers have agreed to participate in the program.

HRI impact analysis

The cost of insulin and patient copays has grabbed headlines in recent years, and CMS is now following in the path of some states that have moved to rein in the costs for patients. Several states have taken steps to limit out-of-pocket costs for insulin. In January, Illinois Gov. J.B. Pritzker signed legislation capping monthly insulin copays to $100, with the monthly limit going forward pegged to the consumer price index-medical care.

Researchers found that from 2006 to 2017, copays for commercially insured individuals with diabetes have been somewhat flat, suggesting that commercial payers have been successful at keeping cost sharing down. However, the analysis excluded uninsured and publicly insured individuals.

Conversely, the American Diabetes Association’s Working Group on Insulin Access and Affordability found that from 2011-13, Medicare spending by utilization on rapid-acting insulin had a compound annual growth rate of 13% and out-of-pocket costs have increased by 10% per year from 2006-13.

Read our research

Contact us

Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

Follow us