Radar on Drug Benefits

At the end of September, California Gov. Gavin Newsom (D) vetoed a bill that would have subjected PBMs to a variety of new requirements and restrictions, saying he wasn’t convinced that it would achieve its goal of making prescription drugs more affordable.  

But what was a major defeat for supporters of SB 966 was a “huge win” for the ERISA Industry Committee (ERIC), which lobbied against California’s PBM-regulating bill even though it also vocally backs PBM reform on the federal level. In fact, ERIC and other like-minded groups representing large employers have long been siding with big PBMs’ main trade group in a pair of legal battles against PBM-targeting laws in Arkansas and Oklahoma. 

CMS on Oct. 9 released a request for information and sample list of medications that could be part of the Medicare $2 Drug List Model, which the agency first floated last year to help lower the cost of common generic medications for beneficiaries with chronic conditions. However, a recent analysis published in JAMA Internal Medicine found the model may only lead to modest savings and impact fewer than 40% of enrollees. 

While Christopher L. Cai, M.D., the study’s lead author, tells AIS Health he was “initially surprised” by the results, he notes the model is voluntary, so CMS is in a bind because it needs to design a program that saves money for members but is also attractive to plan sponsors. 

Because the Inflation Reduction Act (IRA) is making significant changes to the Medicare Part D benefit structure next year, industry watchers have been bracing for CMS’s release of the 2025 landscape files, fearing they would detail sharp premium increases for stand-alone Prescription Drug Plans (PDPs). While those fears have largely not come to fruition, experts say there is still evidence of plan sponsors subtly maneuvering to offset the risks associated with major policy shifts.  

“Given all the changes in plan liability, I think we all expected really substantial changes in the cost to the consumer for Part D, so limited changes in plan premiums were a surprise,” Amanda Tripp, a principal at Avalere Health, tells AIS Health, a division of MMIT. Starting in 2025, the IRA will cap Medicare Part D beneficiaries’ out-of-pocket drug costs at $2,000 annually and change Part D plan sponsors’ cost liability past that cap to 60%, up from 20% in 2024 and 15% in 2023 and earlier. 

Premiums for many stand-alone Medicare Part D Prescription Drug Plans will go up moderately in 2025, while the number of PDP options for beneficiaries will drop significantly, according to AIS Health’s analysis of the recently released CMS Medicare Advantage and Part D landscape files.

The Inflation Reduction Act, passed in 2022, ushered in a host of policy changes to the Part D benefit that will take effect in 2025: Most notably, Medicare Part D beneficiaries’ out-of-pocket drug costs will be capped at $2,000 annually and Part D plan sponsors will be responsible for 60% (up from 20%) of any costs their enrollees incur beyond that cap. As a result, the Medicare Part D national average monthly bid amount (NAMBA) is projected to increase by $115, nearly 180%, to $179.45 in 2025.