Trends in the prescription drug plans delivering the Medicare Part D prescription drug benefit.

PURPOSE: The potential impact of the Democrat-proposed Medicare drug program reform plan; possible Congressional actions in 2007; the standard Medicare prescription drug benefit; the use of low-income subsidies (LIS); and trends in 2006 and 2007 Medicare prescription drug plan (PDP) offerings, coverage, deductibles, premiums, cost-sharing practices, and utilization management strategies are described.

SUMMARY: There is evidence that Medicare prices for prescription drugs are considerably higher than federally negotiated prices. Government negotiations with prescription drug manufacturers and a standard federal PDP are among potential Congressional actions in 2007. Seniors' annual out-of-pocket costs for prescription drugs stand to decrease by hundreds of dollars under the proposed Medicare drug program reform plan. Between 2006 and 2007, the number of PDPs offered in the U.S. increased, and the monthly premium increased for most enrollees. In 2006, approximately four million Medicare beneficiaries were projected to have prescription drug spending in the coverage gap (i.e., "doughnut hole") between partial and catastrophic coverage. Most PDPs provided no gap coverage in 2007, and an estimated 10.9 million enrollees were expected to have no gap coverage in 2007. Approximately 3.3 million low income subsidy (LIS) eligible beneficiaries did not receive assistance in 2006. Cost-sharing practices (i.e., tiered copayments for generic, preferred brand, and non-preferred brand drugs and drugs in specialty tiers) varied among PDPs and over time, sometimes as the result of changes in the PDP's negotiated price for the drug, the patent or formulary status of the drug, or the PDP's tier placement of the drug. The use of utilization management strategies, including prior authorization requirements, step-therapy requirements, limits in the quantity of medication dispensed, and specialty tiers for high-cost drugs, to control PDP costs continued or increased between 2006 and 2007.

CONCLUSION: The PDPs delivering the Medicare Part D prescription drug benefit have been and continue to be subject to change. High Medicare prices and a lack of gap coverage for enrollees remain concerns that may be addressed by Congressional action in 2007.