Medicare Wants To Restrict ‘Lock-In Pricing’
9 CommentsBy Ed Silverman // July 22nd, 2008 // 7:16 am
Why? The practice inflates what some older and disabled people pay for med, because some pharmacy benefit managers are allowed to charge higher prices to health insurers and, eventually, the government, The Wall Street Journal reports.
Under ‘lock-in pricing,’ insurers pay PBMs a set amount for drugs, even if that differs from what the drugs really cost at the pharmacy. And that can boost costs for Medicare beneficiaries because they pay a percentage of their drug costs, and more quickly drive consumers into the donut hole, where they generally must begin paying the full cost of their medicines
Lock-in pricing “has a detrimental effect on the beneficiary because it pushes him into the coverage gap faster,” Abby Block, director of the arm of the government’s Centers for Medicare and Medicaid Services that runs the drug benefit, tells the paper.
CMS figures 19 percent of the hundreds of Medicare drug plans are using lock-in pricing this year, affecting 14 percent of the 25.8 million enrollees in the drug program. Other plans use pass-through pricing, in which PBMs charge insurers the same prices they pay pharmacies. Under a current Medicare proposal, PBMs would be allowed to continue claiming the higher prices for reimbursement. But beneficiaries’ own drug costs would be calculated without the extra amounts included.
Here’s the rest of the story…
Atlex
This practice does take place, but the impact is much smaller than the story indicates. While 14% of beneficiaries are in plans than maintain this practice, only a small percentage of these beneficiaries actually are affected by the donut hole–perhaps, 15%. Thus, the total percent of beneficiaries significantly impacted is probably 2% or so. Of course, even then, it shouldn’t be too hard to legislate or regulate out the practice.
pharma PR hack
Huh? Atlex you are pulling numbers out of thin air. 14% of the benificiaries are affected by the practice and a majority of them will be affected by the donut hole.
Just as a point of reference, The Center for Medicare and Medicaid Services estimated that in 2006 the average Medicare Part D beneficiary spent $3080 a year on medications. That is $500 more than the donut hole which hits at $2516 so practically everyone hits the donut hole. The question for most Medicare participants is when do I hit it and how do I make it through the next $3k of drugs on my own so coverage picks back up.
Atlex
PR Hack,
Please go read the article. It noted that 12% of all beneficiaries reported that they hit the donut hole. Other sources cite 13% to 15%. Separately, the article notes that only 14% of enrollees are in plans that use “lock-in” pricing. Thus, roughly 2% (14% x 15%) of beneficiaries are signficantly impacted by this practice.
Your lack of understanding of the benefit is astounding. The CMS numbers you cite are averages. They are skewed by the very high-cost beneficiaries who enter the catastrophic coverage (where they pay only 5% co-pay) and by the large segment of beneficiaries (dual eligibles and other low income subsidy enrollees) who don’t have a donut hole.
Atlex
Gianna
regardless of the percentage even if it is as low as you say Atlex those are tens of thousands of people…
I’ve hit the donut hole each year since the programs inception. It’s screwed and shouldn’t be allowed to happen. I have no means to pay for the drugs myself.
A kind family member paid for me…there are too many who do not have kind family members with the means to dish out $3,000 bucks…
this is a travesty.
madpharm
Actually the study by Wolters Kluwer Health estimated that 35 percent of all Medicare Part D enrollees or approximately six million people will have entered the “doughnut hole” in 2006. That means 65% didn’t hit the doughnut and with increase generic utilization fewer would have hit the doughtnut if they had paid cash at Costco or Walmart for those generics with big spreads (e.g. fluticasone nasal, simvastatin, sertraline, omeprazole, amlodipine, etc) and they would have saved money on copays.
CMS needs to outlaw lock-in (spread) pricing. We need more transparency so Medicare enrollees don’t have to play this game to get honest pricing. Why isn’t the pharmacy community lobbying Congress to have this changed?
Atlex
Gianna,
As noted in a previous posting, I agree that the ability to have “lock-in” pricing should be fixed and CMS is planning to do so. as fr not being able to afford meds while in the donut hole…have you applied for the LIS? Do you live in a state that has a program to help in the donut hole? Also, many of the major pharmaceutical companies have programs to assist patients in the donut hole.
Madpharma,
The WK report is incredibly flawed and only deals with very limited data. Moreover, it doesn’t properly account for dual and LIS enrollees.
Atlex
pharma PR hack
Atlex, next time maybe you should read a lot closer. It noted 12% in their own WALL STREET JOURNAL ONLINE HARRIS POLL RESPONDENTS REPORTED HITTING THE DONUT HOLE.
Atlex
Hack,
As I said, there are planty of other sources. For instance:
“Just over 3 million Medicare beneficiaries were projected to have spending in the coverage gap in 2007, according to analysis by Actuarial Research Corporation for the Kaiser Family Foundation.”
Since there were roughly 25M enrollees, the percentage is about 12%. Is that good enough for you?
http://www.kff.org/medicare/upload/7044_08.pdf
Atlex
Gianna
I’m not eligible for LIS you have to be dirt poor for that. You can still be significantly low income and not qualify. I can get one of my meds through the pharma company the two other are not offered and one of them is not generic and outrageously expensive…
this year should be the last in the donut whole as I’m withdrawing from all my meds…but I did just hit it again this month…and the withdrawal process is actually very expensive as I have to get multiple doses to taper very slowly.