Study: Hep C drugs could increase Medicare Part D spending in 2015

The federal government’s cost for Medicare Part D will increase between $2.9 billion and $5.8 billion if we see 15% to 30% of hepatitis C (HCV)-infected beneficiaries receive treatment in 2015 and the cost of treatment averages $84,000, according to a new study by Milliman.

This is equivalent to a 6% to 11% increase in federal Part D spending or approximately $100 to $200 per Medicare Part D beneficiary per year. Furthermore, it is estimated that the cost of HCV drug therapies will increase total annual individual Medicare Part D beneficiary premiums by $481 million to $965 million in 2015. This is equivalent to a 4.3% to 8.6% increase over 2014 beneficiary premiums or an additional $17 to $33 per beneficiary per year.

“Most of the cost will be from the federal reinsurance subsidy which is the mechanism used to cover the cost of expensive drugs in Part D,” according to Steve Kaczmarek, principal and consulting actuary, Milliman. “These findings impact US taxpayers and Part D sponsors more than MCOs or hospital decision-makers.”

The Pharmaceutical Care Management Association (PCMA) retained Milliman to analyze the cost impact of the new HCV drug therapies on the 2015 individual Medicare Part D program. There are an estimated 3.2 million people in the United States infected with HCV, many of whom are undiagnosed. Of these 3.2 million people in the United States infected with HCV, approximately 270,000 were enrolled in Medicare Part D in 2013. Therefore, expensive HCV treatments will have a significant impact on individual Medicare Part D spending.

“We used our pricing models to determine who will bear the cost of the new drugs by running pricing scenarios with and without the new drugs,” Kaczmarek explained. Milliman’s analysis measured the impact of these new drugs on the Medicare Part D program; the study did not include the effect of the drug therapy on other medical costs.

“The cost of Medicare Part D will increase significantly if the new drugs [including Sovaldi and Olysio] are used and the cost remains at the current level,” said Kaczmarek. “Formulary managers are likely to use prior authorization and step edits to control utilization.”

Check out Video and roundtable: New hepatitis C drugs Sovaldi, Olysio improve care