Medicare High-Value Drug List Model Could Lower Out-Of-Pocket Costs for 4 in 10 Beneficiaries

The Medicare High-Value Drug List Model could have modestly lowered out-of-pocket spending for 4 in 10 Medicare beneficiaries if implemented in 2021, according to a research letter published in JAMA Internal Medicine.¹

CMS proposed the Medicare High-Value Drug List Model, or the Medicare $2 Drug List, in 2023.² This model would encourage Medicare Part D drug plans to voluntarily cap out-of-pocket costs at $2 per month for a standardized list of 150 generic drugs.¹ Consequently, the researchers conducted a study to estimate potential savings from this policy.

The proposed Medicare High-Value Drug List Model could have modestly reduced out-of-pocket costs for 38% of beneficiaries if implemented in 2021. | Image Credit: Stillfx - stock.adobe.com

To do so, they used the 2021 Medical Expenditure Panel Survey (MEPS), which collects household medication use data and contacts pharmacies for out-of-pocket costs. However, the researchers excluded beneficiaries with out-of-pocket medication spending over $2000 since the Inflation Reduction Act (IRA) will cap the spending for these patients in 2025.

Also, they identified the 150 generic chronic condition medications likely to be included in the model and then determined the percentage of beneficiaries who spend more than $2 per month out of pocket when filling these prescriptions. Next, the researchers calculated savings if costs were limited to $2 per month for these beneficiaries; they repeated analyses across demographic subpopulations.

The researchers included 4092 of the 28,336 MEPS respondents representing Medicare Part D beneficiaries. Among the study population, the median age was 72 years (IQR, 67-78), and most were female (55.4%). Also, the median annual out-of-pocket spending was $99 (IQR, 18-303), with 81% of beneficiaries (95% CI, 80.1-83.3) filling 1 or more of the 150 included generic drugs. Of these fills, 32.5% (95% CI, 30.6-34.4) cost more than $2 per month.

Consequently, the researchers noted that 38.3% (95% CI, 36.2-40.4) of beneficiaries would have saved money with a $2 per month limit on these drugs. The predicted median total out-of-pocket savings were $11 (IQR, 4-27), reducing such spending by a median of 6.8% (IQR, 2.3-14.3). Conversely, they found that only 1.5% of beneficiaries had potential annual savings of $100 or more.

In the demographic subpopulation analyses, Asian, Black, and Hispanic beneficiaries, as well as those of other races and ethnicities (multiracial, Native American or Alaska Native, or Pacific Islander), were associated with lower annual absolute savings. Similarly, those with income below the poverty level and Medicaid dual enrollment were associated with lower annual absolute savings. Conversely, female sex was associated with higher annual savings.

However, the researchers explained that racial and ethnic minority populations, along with those with low income, are disproportionately enrolled in Medicaid and Medicare low-income subsidies, meaning they may already have lower out-of-pocket costs. 

Additionally, they noted that their findings contrast with those of a government analysis, which estimated that a $2-per-month out-of-pocket limit for all generic drugs filled by Medicare beneficiaries would reduce total out-of-pocket spending by 71%.³ Although different conclusions were drawn, the researchers explained that these findings combined with their own suggest that focusing on generic drugs with higher out-of-pocket costs could maximize savings.¹

Lastly, the researchers acknowledged their limitations, one being that they assumed 100% participation in the Medicare Part D plan model since savings would be smaller if not all plans participated. Also, MEPS is limited in sample size and relies on pharmacy-reported cost data, which is susceptible to nonresponse bias. However, they suggested future actions based on their findings.

“Although absolute savings were modest for most beneficiaries, more consistent out-of-pocket costs for commonly used generic drugs might be beneficial for patients and prescribers and could improve medication adherence for chronic conditions,” the authors concluded. “...Additional policies are needed to lower out-of-pocket spending for expensive brand-name drugs.”

References

1. Cai CL, Kesselheim AS, Rome BN. Estimated savings under the Medicare High-Value Drug List model. JAMA Intern Med. doi:10.1001/jamainternmed.2024.4846
2. Inserro A. CMS outlines 3 news drug pricing models targeting wide scope of therapies. AJMC^®. February 14, 2023. Accessed September 23, 2024. https://www.ajmc.com/view/cms-outlines-3-new-drug-pricing-models-targeting-wide-scope-of-therapies
3. Feyman Y, Sayed B, Finegold K, et al. Generic drug utilization and spending among Medicare Part D enrollees in 2022. HHS Assistant Secretary for Planning and Evaluation. March 7, 2024. Accessed September 23, 2024. https://aspe.hhs.gov/sites/default/files/documents/920ec8349c53a362b27e3b10669dafd4/generic-drug-landscape-ib.pdf