New Insights into Part D Specialty Tier

Research looks at the use of medicines in Part D’s specialty tier

07.03.13 | By

According to new research by Milliman, a leading actuarial consulting firm, only about 3.3 percent of Part D enrollees filled a prescription for at least one specialty drug in 2011, a very small portion of total Part D enrollment. 

Only a small percentage of all Medicare enrollees fill prescriptions for specialty drugs, and corresponding spending is slight compared with spending on non-specialty drugs or especially hospital and physician services—the two highest sources of spending in Medicare.  Part D specialty drugs costs in 2012 were about $31 per member per month (PMPM) for elderly, non-dually eligible beneficiaries. In contrast, spending on non-specialty drugs in Part D amounted to $248 PMPM, while spending on hospital and physician services was $507 PMPM and $321 PMPM, respectively.  These numbers mean that specialty tier medicines are used by a small number of patients and represent only a small fraction of overall spending on both medicines and other types of health care services. They're also a tremendous value for patients in the fight against disease.

Despite being a small portion of overall health and drug spending, medicines on specialty tiers in Part D are typically subject to higher cost sharing than other medicines. Several studies have found that as cost sharing increases, rates of prescription abandonment also increase, which often worsens clinical outcomes by reducing patient adherence to prescribed medicines.

Given the high cost sharing burden placed on Part D beneficiaries taking specialty tier medicines, Milliman also examined how eliminating the specialty tier would impact cost sharing on other tiers in the Part D benefit. Milliman found that if all Part D plans were required to eliminate the specialty tier, a typical plan could move all covered specialty tier medicines to other brand tiers with only a minimal increase in cost sharing on those tiers: $3 to $5 per non-preferred brand prescription, $0.50 to $2 per preferred brand prescription, or a $4 increase in the deductible. Overall, eliminating the specialty tier would likely result in lower cost sharing for specialty tier medicines. 

This report provides important insight because of the often-shortsighted view that payers (ie: insurance companies) take when it comes to the value that specialty medicines provide to Part D enrollees. 

The purpose of insurance is to spread risk over a large insured population so that sick patients are not burdened with inordinately high costs for life-saving or life-improving treatment. Subjecting specialty medicines to higher cost sharing, as the Part D specialty tier currently does, contradicts this basic idea behind insurance and often worsens health outcomes if patients are unable to take their medicines as prescribed. A few minor changes to the specialty tier would not only make the benefit work better for patients but it could also mean the difference between a patient adhering to a life-saving treatment or not being able to afford to do so.

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