Specialty Pharmacy

Part D Plans Have Options When Covering Specialty Pharmacy Drugs

Reprinted from the December 2006 issue of MEDICARE PART D COMPLIANCE NEWS, a monthly newsletter on implementation problems and compliance strategies for the new Medicare drug benefit.

The ability of Medicare Part D plans to include specialty tiers on their formularies for very high cost and unique drugs — specialty pharmacy drugs — is an important strategy in terms of keeping premiums and cost sharing low for beneficiaries, and thus giving plans a competitive edge in a crowded marketplace. So said Jennifer Bowman, a director at Avalere Health, LLC, who told listeners during a recent AIS audioconference on Part D coverage issues for specialty pharmacy drugs that in 2006 beneficiaries "overwhelmingly chose plans that have low premiums and low cost sharing."

Based on market research conducted by Avalere, Bowman said that "there are some important differences between Part D plans that have specialty tiers and those that do not." The company's research found that "on average, plans with specialty tiers have lower premiums averaging $26.20 for plans with a specialty tier, versus $29.50 for plans without a specialty tier," said Bowman. And those plans also "have lower deductibles averaging $44 for plans with a specialty tier, versus $103 for plans without a specialty tier."

Specialty Tiers Provide Flexibility

Specialty tiers give plans "flexibility," Bowman noted. Plans may exempt a formulary tier from tiered cost-sharing exceptions, meaning they can charge higher coinsurance than usually allowed. "The cost-sharing exception was statutorily mandated by the MMA [i.e., the Medicare reform law of 2003], but CMS allowed plans not to have the policy for specialty tiers," Bowman said. She noted that "not all plans exercise this option, but some do."

Specialty tiers that restrict cost-sharing exceptions must meet certain requirements. Only one tier may be designated a specialty tier exempt from cost-sharing exceptions, cost sharing for this tier must be limited to 25% in the initial coverage range (or actuarially equivalent for plans with decreased or no deductible basic alternative benefit designs), and only Part D drugs with plan-negotiated prices that exceed $5,000 per month may be placed on a specialty tier.

The drugs on a specialty tier "have to have coinsurance that is actuarially equivalent to 25%. So a plan could have some drugs with coinsurance higher than 25% as long as the average coinsurance is 25%, Bowman explained. Also, she clarified for PDN that plans "can set up the specialty tier so that patients cannot appeal to get lower cost sharing, even if drugs on lower tiers of the formulary do not work for them."

Bowman did point out that many of the specialty drugs do not have a generic equivalent available, and when they are on "a high tier, they have high cost sharing" — 25% or higher coinsurance — "and there's no alternative for patients who might not be able to afford to pay that…coinsurance."

In general, though, Bowman said the study does indicate "good news" for beneficiaries taking specialty drugs and enrolled in a plan with a specialty tier. The study showed that when looking at "the top 20 drugs that were found on specialty tiers, that there are a number of drugs that appear nearly all of the time on a specialty tier when they appear on a Part D plan formulary," she said.

Part D vs. Part B: The Confusion Continues

Despite covering many specialty pharmacy drugs extensively on their formularies, plans are still confused by which specialty drugs are covered under Part D and which are covered under Part B. This results in billing problems and compliance challenges for plans. However, Mary Jo Carden, president of health policy firm Carden & Associates, told listeners that some of the confusion can be cleared up for plans by using "patient status" as the guiding principle.

Uncertainty about which specialty pharmacy drugs are covered, especially those for oncology, home infusion, and transplant patients, is one of the most challenging aspects of Part D implementation, Carden said.

Billing confusion is especially prevalent in situations where a beneficiary is in a nursing home, where infusion therapy and other treatments traditionally covered under Part B are now covered under Part D. "This has been a particularly difficult situation for PDPs [i.e., stand-alone Prescription Drug Plans], and rightly so, because the policy is not well known . outside of the nursing facility industry," she indicated.

It's critical to determine the beneficiary's location in these cases, to "determine the address on record," she explained. "Items that are often billed in an outpatient setting to Medicare Part B ... are billed to Medicare Part D when a person is in a nursing facility," said Carden.

She noted that there "are still some circumstances where some of the smaller [Part D] plans…are still having problems or are not covering the inhalation products under . Part D for the nursing home environment."

The key, she said, is for plans to work with the long-term care pharmacy, understand where the patient resides, and then focus on those particular issues.

When determining whether a vaccine is covered under Part D or B, it is important to know why the vaccine was administered, Carden said. For example, if the vaccine was administered because of the potential risk of exposure to a disease, it is covered under Part B, she explained. However, if the vaccine is given for general prevention of an illness, Carden said it would most likely be covered under Part D.

For immunosuppresants, the key is to examine whether the beneficiary received a transplant using Medicare coverage. If so, it is covered under Part B. If the beneficiary used private health insurance or Medicaid to cover the treatment, it is likely to be covered under Part D, according to Carden.

One of the biggest areas of confusion is injectable agents. Carden advised looking at whether the medication is one that the beneficiary self-administers or whether the physician provides in-office administration. Typically, beneficiaries who get these types of medications at a pharmacy would have them billed to Part D.

If a drug goes through under Part D, and it is in fact incorrect, then the pharmacy has to rebill to Part B. In some cases, these "issues can take quite a long time to resolve," Carden said.

She explained that "Medicare Part B billing is not an overnight process;" there are eligibility and processing requirements for every single prescription. There might be lack of reimbursement to the pharmacy for three or four months, she noted.

What the Future Holds

In addition to the above confusion, there are certain issues that have led to consideration of moving prescription drugs now billed under Part B to Part D, said Carden.

For example, there might be circumstances where Medicare would actually pay more for a prescription drug billed under Part B than it would under Part D, Carden noted.

Furthermore, under Part D, there are incentives for employer-sponsored programs to continue to pay for, or to subsidize the drug benefit, and thus remove some of the burden on the government, but these issues have to be considered quite closely.

Moving Part B drugs to Part D "would have to be a legislative approach," Carden explained. And "most specialty products are paid by Medicare Part B under the Average Sales Price method. But if products start to be paid under Medicare Part D, the move could have a substantial impact, particularly on specialty pharmacy pricing," she said.

To purchase a CD of AIS's Oct. 26 audioconference Part D Coverage for Specialty Pharmacy Drugs: Resolving Complex Issues That Remain, click here.

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