Medicare Drug Plans to cover fewer medications

ALERT: Rally/Press Conference

Thursday, December 13, 1:30 PM,
Outside office of House Speaker Nancy Pelosi
450 Golden Gate Ave (at Polk St.), San Francisco

Stop Privatization of Medicare and cuts in healthcare.
Support the national Single -Payer healthcare bill, HR 676.
We need emergency relief on Medicare Part D right now.

Kaiser Daily Health Policy Report, December 4, 2007

Medicare Drug Plans to cover fewer medications

The number of medications covered under Medicare prescription drug plans offered by the 10 health insurers with the largest enrollment will decrease next year by 26%, according to a recent analysis by Avalere Health, USA Today reports. (See below. According to the analysis, the number of medications covered under Medicare prescription drug plans offered by UnitedHealth and Humana next year will decrease by 30%, from more than 3,750 treatments to more than 2,620, although the plans will continue to have some of the largest formularies available.

The decrease in the number of medications covered under Medicare prescription drug plans will occur “mainly because of changes made by Medicare,” which no longer will reimburse plans for treatments that FDA has removed from the market, are considered less than effective, have duplicative billing codes or are no longer manufactured, USA Today reports.

CMS officials and health insurers maintain that the decrease likely will not affect Medicare beneficiaries who take medications no longer covered by prescription drug plans because they will have access to alternative treatments and can use an appeals process to seek continued coverage of their current treatments. Humana spokesperson Tom Noland said, “As the Part D program develops, the size of the formulary is becoming more aligned with utilization patterns, consumer preferences, health outcomes and value for consumers” (USA Today).


USA TODAY, December 4, 2007

Medicare cuts back on drugs covered by Part D
Most enrollees won’t be affected

By Julie Appleby

Medicare beneficiaries are likely to see a smaller number of drugs covered under their Part D insurance plans next year, as insurers have revised offerings and the government has culled hundreds of products from a list of approved drugs.

On average, the number of drugs offered by the 10 insurers with the largest enrollment shrank by 26% from this year to next, according to data analyzed by Washington consulting firm Avalere Health.

Two of the largest insurers — UnitedHealth and Humana — saw drops of 30% in some of their plans, from more than 3,750 drugs to just more than 2,620, Avalere’s analysis shows. Even so, the two insurers still have among the largest drug lists of the 10 biggest insurers.

The drop came mainly because of changes made by Medicare, which shrank the list of drugs it will pay for, culling those that have been pulled by the FDA, are no longer being made, had duplicative billing codes or were drugs deemed “less than effective” by the FDA.

Medicare officials and the insurers say most beneficiaries are unlikely to be affected. Enrollees taking drugs that were pulled will usually be able to find alternates or can go through an appeals process to try to stay on their current drugs, they said.

“Most of those (removed) drugs were not used,” says Jeff Kelman, chief medical officer for Medicare’s Center for Beneficiary Choices.

UnitedHealth spokesman Daryl Richard says even with the drop, the company’s Medicare Rx Preferred plan covers “100% of the drugs” on Medicare’s approved list.

Humana spokesman Tom Noland says, “As the Part D program develops, the size of the formulary is becoming more aligned with utilization patterns, consumer preferences, health outcomes and value for consumers.”

Avalere’s Jon Glaudemans says the enrollees should check the drug lists of plans they are considering before signing up, to see if the medications they take are included. The deadline for enrolling is Dec. 31.

“Every year, insurers revise their formularies, and every year, beneficiaries should reassess their choices,” Glaudemans says.

One group that may be particularly affected by the change are some beneficiaries who qualify for government premium subsidies because they are low-income.

About 2.1 million low-income-subsidy enrollees will be automatically switched to new insurers in 2008 because their current insurers raised premiums above a government benchmark.

An Avalere analysis of those being switched from plans in Texas to other plans found that, on average, enrollees will be switched to coverage with 14% fewer drugs than if they had been able to remain with their current insurers, based on the revised 2008 drug lists.

In addition, the new insurers require prior authorization on 15% of all drugs offered, compared with 10% under the plans no longer eligible to take low-income enrollees in Texas. That means the patient has to get approval from the insurer before getting the drug.

“This means they will have a harder time accessing what they need,” says Dan Mendelson, president of Avalere.

Medicare spokesman Jeff Nelligan says there is no way to determine if the Avalere findings from Texas also hold true nationally.

Nelligan said that insurers must meet Medicare’s requirements for offering drugs in all classes of products, provide at least a 30-day transition for those who must change drugs and offer an appeals process.

He added that subsidy-eligible enrollees can change insurers even after the open enrollment period closes. Other enrollees cannot change.


Avaere Press Release, November 16,, 2007

Medicare Prescription Drug Plans Reduce Average Number of Covered Drugs in 2008

Contact: Lindsey Spindle, 202.207.1337,


Washington, DC – The most popular standalone Medicare prescription drug plans will cover fewer drugs in 2008, says a new independent analysis released today by Avalere Health. The result is explained in part by the Centers for Medicare & Medicaid Services’ (CMS) decision to drop more than 1,500 drug codes from last year’s list of formulary-approvable drugs, including some that lack FDA approval.

Using its proprietary DataFrame® database tool and recently released CMS public use file data, Avalere researchers compared formularies of the 1,824 available standalone prescription drug plans (PDPs) entering the 2008 market. Avalere analyzed trends in the total number of drugs covered, changes in cost-sharing arrangements, and other aspects that shape the consumer experience under Medicare Part D.

Of the top 10 PDPs by enrollment, all but two will decrease the total number of Part D covered drugs. Taken together, the top ten plans decreased the size of their formularies by 26%, from an average of 3,094 drugs in 2007 to 2,285 drugs in 2008. Overall, the enrollment weighted average number of covered drugs in 2008 is 2,134, a 26% decrease from the 2007 average of 2,892.

The reductions may largely be attributed to plans’ reaction to the CMS decision to no longer include drugs lacking FDA approval on the CMS list of formulary-approvable drugs. Other possible reasons for shrinking formularies include plans’ desire to: position competitively, increase rebates, or mitigate out-of-pocket patient costs. Silverscript is the only one of the top 10 most popular PDPs that is dramatically increasing its formulary for 2008, relative to its 2007 formulary; WellCare added a total of six drugs to its 2007 formulary total.

Importantly, in 2007, CMS allowed plans to build their Part D formularies from a list of approximately 7,100 products, but for 2008, CMS reduced that number to around 5,500 products. In 2008, most of the top 10 plans increased the proportion of covered drugs relative to the respective CMS 2007 and 2008 formulary reference files.

The products deleted by CMS for the 2008 plan year include many drugs that are not FDA-approved, consistent with CMS policy that Part D drugs must be FDA approved. By FDA standards, drugs approved since 1962 are approved on the basis of safety and efficacy. Drugs approved by the FDA between 1938 and 1962 were reviewed on the basis of safety, but not efficacy. According to CMS policy, drugs approved in the 1938-1962 period, and since determined to be “less than effective,” should not be covered by Part D plans. This non-coverage determination comes despite the fact many of those products deemed less than effective appear in formulary reference files used by plans to design their Part D formularies in 2006 and 2007. In 2008, CMS has removed those drugs from its formulary reference file, and thus most plans are no longer covering them. A small proportion of plans have elected to cover some of these drugs on their own, without access to Medicare subsidies.

Avalere also found that consumers can expect an even larger spread in their payments for generic and branded drugs, and that the four-tier drug plan design has become the overwhelming favorite for Medicare PDPs (over 87% use four tiers or more, whereas three-tier designs are still the most popular in the commercial world). Consumers can expect significant increases in cost sharing for drugs positioned on the second tier (usually preferred brand-name drugs) and the fourth tier (usually more expensive biologic and specialty products).

“Consumers should look beyond monthly premiums to the specific formularies to ensure drugs that they are concerned about are covered and at a cost level they can afford,” said Jon Glaudemans, senior vice president of Avalere Health, and the lead researcher for this analysis. “Changes are occurring at all levels of the Medicare drug benefit – from significant movements in monthly premiums, to the composition and copayment structure of formularies.”

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