I think those are drugs to dissolve clots that are a problem and not necessarily run of the mill blood thinners.
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Trulicity and another drug in that class called Ozempic (Oh,Oh,Oh Ozempic!) Just got approved by the FDA for advertising weight loss so we are predicting a big increase in utilization on those drugs over the next couple of years. Ozempic will be in their list next year I would guess.
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The big change for us is on the Part D benefit structure. They added a max member out of pocket per year of $2,000, a max monthly $35 copay for insulin, and the catastrophic phase of the members coverage will go from CMS paying 80% and the plans paying 15% to the plans paying 75% and CMS paying 20%. The other 5% was paid by members and now will be paid by the drug manufacturer. That is triggered from the time the member hits the $2000 and on.
That takes a lot of the rebate strategy off the table.
Can you say more about how this changes the rebate strategy? I’m sort of aware that rebates exist but not too familiar with the mechanics.
You may be correct, I’m not well versed on those.
Well right now the catastrophic phase kicks in after the member out of pocket is around $5000. From there CMS pays 80% of that members claims. Whatever portion of the total claims for a given plan are in the catastrophic phase we have to reimburse CMS that percentage of our rebates collected on that plan. The average is generally around 40ish% of the total plan paid in the catastrophic phase. So CMS is paying 80% of the claims for many expensive brand name drugs and only getting 40ish% of the rebates on the same drugs. This creates a dynamic that financially incetivizes plans to keep expensive brand name drugs on the plan and push members into that catastrophic phase to collect rebates.
This sounds somewhat sinister and is bad for members that are sick, but it substantially reduces premium for non sick members. The new structure will kill this practice but substantially increase premiums for all members. I’m guessing premiums for Part D plans are going to increase by at least 30% in 2024 when all of these changes take place. So sick people pay less, healthy people pay more.
OK, that’s super helpful. I was sort of aware of the ‘80% of the cost above the catastrophic threshold’ mechanism but did not know how the rebate mechanism worked. I actually wasn’t aware that plans had to give any rebates back to CMS. The more you know.
I did know that pharma was also giving rebates to providers. Which had a similar effect of increasing utilization of expensive drugs.
So, what is changing in the new bill?