Radar on Drug Benefits

In comment letters submitted to the federal government, health insurers warn — in so many words — that CMS could be facing lawsuits if it finalizes a rule that expands Medicare and Medicaid coverage of medications that treat obesity. 

In fact, at least two comment letters from the health insurance industry point out that a recent Supreme Court decision makes it far easier for courts to determine that federal agencies have overstepped their authority. 

“The absence of Chevron deference makes it easier for groups to challenge a regulation on the grounds that it fails to comport with the underlying law, even if under Chevron deference the regulation reflects a reasonable interpretation of the law,” explains Suhasini Ravi, a senior associate at the Center for Health Policy and the Law at Georgetown University’s O’Neill Institute.  

Federal PBM reform legislation that was scuttled last year could still end up in the next federal spending bill. But one expert tells AIS Health that other congressional priorities may take precedence instead. In the meantime, a slew of states have introduced PBM reform bills of their own. 

In December, PBM reform was on the cusp of passing in a year-end spending bill but was thwarted when then-President-elect Donald Trump expressed disdain toward the size of the 1,500-page bill and asked for a suspension of the debt ceiling until 2027. Ultimately, a pared-down version was passed that omitted PBM reform and the debt ceiling provision. The PBM reform included several transparency provisions, delinked PBM reimbursement from Medicare Part D drug prices and required 100% pass-through of rebates to employer group health plans. 

Pharmacies owned by companies that own both health insurers and PBMs make up a significant share of the Medicare Part D market, and these “insurer-PBMs” meaningfully steered Medicare beneficiaries to their affiliated pharmacies, according to a new study published in JAMA Health Forum.

The researchers analyzed a 20% sample of Medicare Part D claims data from Medicare Advantage Prescription Drug (MA-PD) plans and stand-alone Prescription Drug Plans (PDPs) for 2021, which collectively covered more than 10.4 million beneficiaries. They found that 34.1% of all pharmacy spending, 37.1% of specialty pharmacy spending, and 32.1% of non-specialty pharmacy spending occurred through pharmacies owned by The Cigna Group, CVS Health Corp., Humana Inc., or UnitedHealth Group.

Stand-alone Medicare Part D Prescription Drug Plans (PDPs) significantly increased their use of coinsurance for popular branded medications between 2020 and 2024, leading to much higher out-of-pocket costs for beneficiaries, according to an analysis published on Feb. 14 in JAMA. Erin Trish, Ph.D., the study’s lead author, tells AIS Health that the results indicate the PDP market “is exposed to inflated list prices through coinsurance” and adds, “if we don’t address PBM reform, you’re leaving beneficiaries in the dust.” 

Meanwhile, an Avalere analysis of Part D formulary files found that 63% of Medicare Advantage Prescription Drug (MA-PD) plans this year have at least two coinsurance tiers, up from 18% last year, and that 83% of PDPs have three coinsurance tiers this year, up from 57% last year. Kylie Stengel, an Avalere associate principal, tells AIS Health that the shift from flat copayments to coinsurance is a “cost-management tool” that payers are using due to Inflation Reduction Act (IRA) provisions that went into effect this year, including a $2,000 out-of-pocket maximum for drugs that led to Part D plans “taking on a lot more liability” for pharmacy spending among its members. 

While the federal government has already set negotiated prices for the first round of drugs subject to the Medicare Drug Price Negotiation Program, states that have the authority to set upper payment limits (UPLs) for medications are inching toward doing so — despite a variety of complications. 

On the state level, the authority to set UPLs for select drugs is wielded by prescription drug affordability boards (PDABs), which states across the country have created in recent years amid mounting frustration over rising drug costs. Not all PDABs are authorized to set UPLs, but among the five boards that do, Colorado and Maryland are the furthest along in the process.