Medicare Plans Affected by Rising Drug Costs

Employers and patients in corporate health plans are not the only ones affected by the soaring prices of specialty drugs. Enrollees in Medicare drug plans are also feeling the pressure.

Many leading pharmacy benefit managers and drug insurers that oversee employer plans also offer coverage through the Medicare Part D drug insurance program, and so are profiting from federal spending on specialty drugs and from Medicare patients’ own high out-of-pocket co-payments.

Driven in part by specialty drugs, the prices of medicines heavily used by the elderly have risen more than 24 percent since June 2006, two senior health economists at Harvard reported in January in the policy journal Health Affairs.

In that article the economists, Richard G. Frank and Joseph E. Newhouse, said single-source unique drugs have the potential to present “important new pressures on the federal budget.”

Many Part D plans segregate specialty drugs in a special tier, where a Medicare enrollee pays 25 to 33 percent of the price, according to Jack Hoadley, a research professor at Georgetown University. At that rate, patients quickly reach the $5,726 cap on out-of-pocket spending, after which the patient pays only 5 percent. From that point, the drug plan sponsor pays 15 percent, while Medicare pays 80 percent of the cost.

The trend, the Frank-Newhouse article said, bodes ill for “the worrisome future financial health of Medicare.”

MILT FREUDENHEIM