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Senior Citizens Not Reviewing Medicare Drug Plans May Get Shock in 2008

Medicare has cut 1,500 drugs from last year’s list eligible for formularies

"Changes are occurring at all levels of the Medicare drug benefit – from significant movements in monthly premiums, to the composition and copayment structure of formularies."

Dec. 5, 2007 – The evidence continues to be exposed showing senior citizens are facing major changes in the Medicare drug plans for 2008, including news that the largest stand-alone plans will reduce the drugs they cover by the hundreds. A major reason, says consulting company Avalere Health, is that the Centers for Medicare & Medicaid Services decided to drop more than 1,500 drug codes from last year’s list of formulary-approvable drugs, including some that lack FDA approval.

An example is the top plan promoted by AARP, AARP MedicareRx Preferred, which is reducing its drug formulary by 30.2 percent. (See chart below story.)

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Open enrollment for the Medicare Part D prescription drug benefit runs from November 15 through December 31, 2007, and provides an opportunity for Medicare beneficiaries to enroll or change plans.

Using its proprietary DataFrame database tool and recently released CMS public use file data, Avalere researchers compared formularies of the 1,824 available standalone prescription drug plans (PDPs) entering the 2008 market. Avalere analyzed trends in the total number of drugs covered, changes in cost-sharing arrangements, and other aspects that shape the consumer experience under Medicare Part D.

Of the top 10 PDPs by enrollment, all but two will decrease the total number of Part D covered drugs.

Taken together, the top ten plans decreased the size of their formularies by 26%, from an average of 3,094 drugs in 2007 to 2,285 drugs in 2008. Overall, the enrollment weighted average number of covered drugs in 2008 is 2,134, a 26% decrease from the 2007 average of 2,892.

The reductions may largely be attributed to plans’ reaction to the CMS decision to no longer include drugs lacking FDA approval on the CMS list of formulary-approvable drugs, according to Avalere researchers.

Other possible reasons for shrinking formularies, they say, include plans’ desire to: position competitively, increase rebates, or mitigate out-of-pocket patient costs.

Silverscript is the only one of the top 10 most popular PDPs that is dramatically increasing its formulary for 2008, relative to its 2007 formulary; WellCare added a total of six drugs to its 2007 formulary total.

Changes in California for 2008 are Sample for Nation A fact sheet on California by Avalere highlights several important changes to the drug benefit and the options available to Medicare beneficiaries in California for 2008. It examines changes in the number of participating plans, benefits, premiums, and cost sharing. Key findings include:   ● Medicare members in California will have more plans to choose from in 2008, particularly those who want to receive their drug benefit through a Medicare Advantage health plan.   ● Most beneficiaries enrolled in stand-alone drug plans will see a sharp rise in premiums if they choose to remain in their current plan, while most beneficiaries enrolled in Medicare Advantage drug plan will see their premiums decrease or stay the same.   ● The average increase in PDP premiums for beneficiaries in California who remain in their current plan is nearly twice the national average.   ● More plans will provide generic drug coverage within the Part D "doughnut hole" -- the gap between the initial coverage limit and the threshold for catastrophic coverage. Brandname drug coverage in the doughnut hole will be available only from a few Medicare Advantage plans.   ● As in 2007, most plans will not require a beneficiary to pay a deductible before receiving drug coverage.   ● California's low-income Medicare population in need of plans with no premium will have fewer options and a significant proportion will have to switch plans to receive their full federal subsidy and thus avoid paying higher premiums. The complete fact sheet is available with link below. The Medicare Drug Benefit: Changes in California for 2008 (209K)

Importantly, says Avalere, in 2007, CMS allowed plans to build their Part D formularies from a list of approximately 7,100 products, but for 2008, CMS reduced that number to around 5,500 products.

In 2008, most of the top 10 plans increased the proportion of covered drugs relative to the respective CMS 2007 and 2008 formulary reference files.

The products deleted by CMS for the 2008 plan year include many drugs that are not FDA-approved, consistent with CMS policy that Part D drugs must be FDA approved.

By FDA standards, drugs approved since 1962 are approved on the basis of safety and efficacy. Drugs approved by the FDA between 1938 and 1962 were reviewed on the basis of safety, but not efficacy.

According to CMS policy, drugs approved in the 1938-1962 period, and since determined to be "less than effective," should not be covered by Part D plans. This non-coverage determination comes despite the fact many of those products deemed less than effective appear in formulary reference files used by plans to design their Part D formularies in 2006 and 2007. In 2008, CMS has removed those drugs from its formulary reference file, and thus most plans are no longer covering them.

A small proportion of plans have elected to cover some of these drugs on their own, without access to Medicare subsidies.

Avalere also found that consumers can expect an even larger spread in their payments for generic and branded drugs, and that the four-tier drug plan design has become the overwhelming favorite for Medicare PDPs (over 87% use four tiers or more, whereas three-tier designs are still the most popular in the commercial world).

Consumers can expect significant increases in cost sharing for drugs positioned on the second tier (usually preferred brand-name drugs) and the fourth tier (usually more expensive biologic and specialty products).

"Consumers should look beyond monthly premiums to the specific formularies to ensure drugs that they are concerned about are covered and at a cost level they can afford," said Jon Glaudemans, senior vice president of Avalere Health, and the lead researcher for this analysis.

"Changes are occurring at all levels of the Medicare drug benefit – from significant movements in monthly premiums, to the composition and copayment structure of formularies."

Changes in drug coverage by largest Medicare drug plans
This chart shows the average change among the five largest insurance plans, by enrollment size.
Part D plan	July 2007 enrollment	Number of drugs in 2007	Number of drugs in 2008	%. change, 2007-08
AARP MedicareRx Preferred	3.1 million	3,763	2,627	-30.2%
Humana PDP Standard	2.1 million	3,752	2,623	-30.1%
Humana PDP Enhanced	1.1 million	3,755	2,623	-30.1%
Community Care Rx Basic	1.0 million	1,835	1,627	-11.3%
AARP MedicareRx Saver	0.9 million	3,167	2,184	-31.0%
Source: Avalere Health

Avalere Health is a leading advisory company focused on business strategy and public policy. It serves a diverse client base, which includes Fortune 500 healthcare technology companies, federal government agencies, and major medical foundations. The company is organized into seven substantive areas - Medicare, Medicaid, Reimbursement, Long-Term and Post-Acute Care, Health Information Exchange, Evidence-Based Medicine, and Education. Anchored by a comprehensive research engine and staffed by experts in business, medical product commercialization, and health policy, Avalere provides strategic guidance, objective analytic research, and quality educational programs focused on the full range of healthcare issues facing our nation.

Further information can be obtained at www.avalerehealth.net.

More coverage:

“Medicare cuts back on drugs covered by Part D,” by Julie Appleby, USA TODAY – Click Here

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