Specialty drugs tripled Part D catastrophic coverage spending in 5 years

Between 2010 and 2015, payments for Medicare Part D catastrophic coverage tripled to $33 billion, thanks to increased prices for drugs, according to a report from HHS’s Office of the Inspector General (OIG).

Catastrophic coverage kicks in when Part D beneficiaries exceed out-of-pocket spending thresholds. In the five-year period of claims data examined by OIG, the number of people reaching that mark rose by 53 percent to 3.6 million. They personally spent more out of pocket, as most beneficiaries in catastrophic coverage have a 5 percent co-pay for drugs, while federal spending soared because the government picks up the “vast majority” of the remaining costs.

High-price drugs were largely to blame for the spike in spending, according to OIG. Drugs that cost more than $1,200 per month made up two-thirds of the $33 billion spent on catastrophic coverage in 2015, up from a one-third share in 2010.

In 2015, 10 drugs accounted for $15 billion of all drug spending in catastrophic coverage. The most was spent on Gilead’s Hepatitis C treatment, Harvoni, which accounted for nearly $6.3 billion. The drug has an average monthly price of more than $33,000.

It was one of the four drugs on the top 10 list which was approved by the Food and Drug Administrators after 2010. The older drugs on the list, including blood cancer drug Revelmid and multiple sclerosis treatment Copaxone, have had “steep increases in their average monthly price” since 2010.

If growth continues at this rate without action from regulators, OIG said the sustainability of catastrophic coverage and all of Part D may be at risk.

“Moving forward, CMS will likely need additional tools to address these issues,” the report said. “Potential tools have been discussed by experts and include restructuring the Part D benefit so that sponsors have more incentives and opportunities to lower costs, creating more transparency about drug pricing, promoting value-based options and revising the law to allow the federal government to negotiate prices for certain drugs.”