Insurers, Pharma Spar Over ‘Doughnut Hole’ Fix

by Leslie Small

While significant policy moves appear unlikely to occur in the “lame duck” period following the midterm elections, the pharmaceutical industry may use that time to push through a Medicare Part D change that could wind up costing health insurers.

At issue is an adjustment to the Bipartisan Budget Act (BBA), enacted in February, which shifts most of the cost burden for the Medicare Part D “doughnut hole” onto pharmaceutical companies.

The Pharmaceutical Research and Manufacturers of America (PhRMA) argues it’s unfair that they must pay 70% of the costs for branded drugs in the doughnut hole — the period in which a consumer has surpassed the initial coverage limit but hasn’t yet hit the catastrophic-coverage threshold — while health plans must pay only 5%. Originally, pharma companies were set to pay 50% and health plans 25%, with consumers responsible for the balance.

A provision that would have given the pharma industry some $4 billion in relief was initially included in the Opioid Crisis Response Act of 2018 but ultimately nixed.

However, the pharmaceutical industry isn’t ready to admit defeat. “PhRMA’s fix for the recent Medicare ‘Donut Hole’ legislation could come by the end of the year,” Citi analyst Ralph Giacobbe wrote in an Oct. 3 research note based on a meeting with congressional staffers.

But that possibility has drawn the ire of America’s Health Insurance Plans (AHIP), which pushed back against PhRMA’s argument that the BBA’s doughnut hole fix reduces plans’ incentives to lower Part D costs by lessening their stake in the program. “Part D plans have every incentive to keep costs down: specifically, to offer lower premiums and copays, increase enrollment, and better serve seniors,” the trade group said in a blog post.

But Sean Creighton, a vice president at Avalere, says he isn’t so sure. “Over time, the government’s direct liability has gotten bigger and bigger [while] the plans’ proportional risk has gotten smaller and smaller. And this shift of the money in the doughnut hole away from the plan to the manufacturer has further decreased health plan risk for the program,” he says.

 From RADAR on Drug Benefits

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