Savings without changes


Not only on track to cost nearly $350 billion, or 45 percent, less than initially projected over the first 10 years of the program, it is also reducing other health care costs within Medicare. Even the Congressional Budget Office (CBO) has credited Part D as responsible for much of the slowdown in overall Medicare spending. The nonpartisan office has also reduced its 10-year forecast for Part D by over $100 billion in each of the last three years.
 
Since its inception, Part D has made prescription medicines more widely available to seniors and disabled Americans who need them, and its success is undeniable. Today, 9 in 10 seniors have comprehensive prescription drug coverage through Part D or another chosen source, and beneficiaries in every region have more than 20 plans from which to choose.
 
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This increased access has reduced hospitalizations and other health care costs by improving beneficiaries’ health. In fact, a recent study supported by PhRMA found that Part D led to more than $2.3 billion in annual savings for Medicare through reductions in medical expenditures for beneficiaries diagnosed with congestive heart failure without prior comprehensive drug coverage.

The same study also reported that further improvements in adherence for this population could potentially save Medicare an additional $1.9 billion annually or nearly $22.4 billion in federal savings over 10 years. Additionally, citing a substantial body of evidence, CBO recently announced it will credit policies that increase use of medicines with savings on other Medicare services.
 
The key to Part D’s success is its competitive structure. Insurance plans and pharmacy benefit managers, which already negotiate on behalf of tens of millions of people in the commercial sector, use their clout and specialized expertise to negotiate discounts and rebates on medicines for Part D enrollees. This market-based competition helps control costs for seniors and disabled individuals. Average Part D beneficiary premiums have remained virtually flat over the last three years at about $30 per month and are half of the original forecast.

Additionally, as noted in previous years, the latest Medicare Trustees report states that many brand name medicines carry substantial rebates, often as much as 20 to 30 percent. Both former CBO Director Peter Orszag and former CMS Administrator Donald Berwick agree that private market competition has been effective in controlling Part D costs.
 
While substantially lower spending and premiums are a clear measure of how well the program is working, Medicare Part D succeeds on another crucial test – satisfaction among program participants. According to MedPAC, 94 percent of Part D enrollees are satisfied with their coverage and 95 percent are confident that the level of coverage meets their needs.
 
Despite all of the success that Part D has experienced, some policymakers are pushing old, previously rejected ideas to reform Part D as we approach the 10-year anniversary of the law. The proposals range from requiring government interference in price negotiations to imposing Medicaid price controls, or mandatory rebates, on medicines used by low-income Medicare beneficiaries.

Imposing mandatory price controls or requiring government interference in price negotiations would undermine Part D’s success. According to analysts, mandatory rebates could result in higher premiums, reduced plan choices, and restricted access to needed medicines. Further, CBO notes that government interference in Part D price negotiations would have a negligible effect on federal spending unless the Secretary of Health and Human Services put additional restrictions on access to medicines.
 
More fundamentally, mandatory rebates could discourage biopharmaceutical companies’ investment in the development of innovative treatments, according to CBO. At a time when the potential for scientific breakthroughs has never been greater, reduction in research and development could slow progress toward new medicines for chronic diseases and conditions that impact seniors, from cancer to Alzheimer’s.

Part D is helping to improve the overall health of Medicare and the health of our nation’s seniors and disabled individuals. It is saving money for beneficiaries and the government. Why change that? Misguided proposals to alter Part D’s structure represent a step in the wrong direction. 

Castellani is CEO and president of PhRMA, or the Pharmaceutical Research and Manufacturers of America, a trade group representing U.S. biopharmaceutical and pharmaceutical research companies.

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