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The Medicare Part D Prescription Drug Benefit


The Medicare Part D Prescription Drug Benefit Understanding the Formulary Requirements and Related Implications Michael Sharp, R.Ph, Pharmacy Consultant – PowerPoint PPT presentation

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Title: The Medicare Part D Prescription Drug Benefit

The Medicare Part D Prescription Drug Benefit
  • Understanding the Formulary Requirements and
    Related Implications

Michael Sharp, R.Ph, Pharmacy Consultant Office
of Medicaid Policy and Planning, State of
Areas of Focus
  • Basic benefit principles, fundamental formulary
    requirements and CMS review processes
  • Exceptions/Appeals overview
  • Formulary implications for dual-eligibles and the
    Indiana Medicaid approach
  • Implementation considerations, timeline and
    recommended resources

Medicare Coverages
Part A Hospital insurance for inpatient stays, some skilled nursing facility care, hospice care and home health care
Part B Medical insurance for physician services, outpatient hospital care, durable medical equipment, some medical supplies and selected drugs
Part C Medicare Advantage (MA-PD) for benefits through private health plans old MedicareChoice
Part D Prescription drug benefit for persons eligible for Part A or enrolled in Part B
Medicare Prescription Drug Benefit, 2006
and Beyond
  • Beginning in 2006, beneficiaries have choice
  • Traditional Medicare, with access to private
    drug-only plans (PDPs)
  • Medicare Advantage (MA-PD) plans for Medicare
    benefits and Rx drugs
  • New plans provide standard prescription drug
    benefit or its actuarial equivalent
  • Plans have some flexibility to determine which
    drugs are covered and cost-sharing requirements,
    subject to certain constraints
  • Premium and cost-sharing subsidies for low-income
    beneficiaries with incomes up to 150 poverty and
    modest assets
  • Medicaid will no longer pay for Medicare D
    covered drugs after December 31, 2005

Medicare Prescription Drug Plans
  • Must offer basic drug benefit
  • Standard benefit
  • May offer supplemental benefits
  • Alternative Benefit
  • Enhanced benefit
  • Can be flexible in benefit design
  • May look different than standard benefit
  • May have different co-pay or co-insurance
  • Cannot change actuarial equivalence

Part D Sponsors Risk-Bearing Entities
  • Prescription Drug Plans (PDPs)
  • Pharmacy Benefit Managers
  • Private Insurance Companies
  • Medicare Advantage-Prescription Drug (MA-PDs)
  • Must offer at least 1 option for Rx coverage
  • May offer plans with no drug coverage for
    beneficiaries who decline Part D coverage
  • May offer Special Needs Plans, focusing on Duals
    selected diagnoses

Formulary Coverage Fundamentals
  • CMS says clinically appropriate medications, at
    lowest possible cost
  • Formularies must not discriminate against
  • Individuals with HIV/AIDS, mental health and
    other cognitive disorders
  • The Dual eligibles
  • CMS utilizes the USP formulary classification
    model as the minimum benchmark for formulary
  • USP model consists of 146 therapeutic
    classifications and related pharmacologic
  • Plans must accommodate all medically necessary
    medications at all levels of care

Medicare Prescription Covered Drugs
  • Prescription drugs, biologicals and insulin
  • Medical supplies associated with injection of
    insulin (syringes/swabs/etc)
  • Cases where a drug is not FDA approved for an
    indication but it has clinical literature to
    support its use
  • Vaccines not covered by Part B
  • Viagra, Levitra and Cialis
  • Brand name and generic drugs will be included in
    each formulary
  • Less for generics or preferred Rx, more for
    brands. Multi-source brand name products can be

Formulary Requirements
  • Plan formulary must be developed by a Pharmacy
    and Therapeutics Committee
  • Formulary must include at least 2 drugs in each
    therapeutic category and pharmacologic class of
    covered Part D drugs and in certain categories,
    must contain all or substantially all of the
    following medications
  • Antidepressants
  • Antipsychotics
  • Anticonvulsants
  • Antiretrovirals
  • Antineoplastics
  • Immunosuppressants

Part D Drug Exclusions
  • Drugs for
  • Anorexia, weight loss, or weight gain
  • Fertility
  • Cosmetic purposes or hair growth
  • Symptomatic relief of cough and colds
  • Prescription vitamins and mineral products
  • Except prenatal vitamins and fluoride
  • Non-prescription (OTC) drugs, with the exception
    of OTC insulin
  • Barbiturates
  • Benzodiazepines
  • Outpatient drugs for which the manufacturer seeks
    to require that associated tests or monitoring
    services be purchased exclusively from the
    manufacturer or its designee as a condition of
  • Plans may choose to pay for OTC products as an
    administrative cost, with the member not
    incurring a co-pay, these products do not count
    towards formulary requirements.

Part D Drug Exclusions (cont)
  • Part A Prescriptions
  • In skilled nursing homes up to 100 day stay
  • Related to the terminal illness for hospice
  • Part B Outpatient Drugs
  • Durable Medical Equipment Drugs (e.g., inhalation
    therapy, insulin w/pumps some
  • Immunosuppressive Drugs
  • Hemophilia Clotting Factors
  • Selected Oral Anti-Cancer Drugs
  • Selected Oral Anti-Emetic Drugs, up to 48 hrs
    after chemotherapy administration
  • Erythropoietin for persons on dialysis
  • Intravenous Immune Globulin, provided in the home

PT Committee Requirements
  • Membership includes the following
  • The majority are practicing physicians and
  • Various clinical specialties that reflect the
    needs of the plan beneficiaries.
  • At least one practicing physician and pharmacist
    who are experts in the care of the disabled or
  • CMS provides extensive guidance on the
    expectations surrounding the composition and
    activities of the PT committee

Formulary Review Rationale
  • Medicare Modernization Act requires CMS to review
    formularies and related processes to ensure
  • Beneficiaries have access to a broad range of
    medically appropriate drugs to treat all disease
    states, and
  • Formulary design does not discriminate or
    substantially discourage enrollment of certain

Formulary Review CMS Validations
  • Checks for appropriate utilization management
  • Checks for two drugs per USP category and class
  • Checks for Key Drug Types as defined by USP
  • Checks for the most common drugs used in the LTC
  • Checks all or substantially all requirement

Formulary Considerations
  • Safety and Efficacy
  • Cost-effectiveness
  • In general, formulary design will be similar to
    that of commercial plans today, with the added
    benefit of CMS oversight for adherence to
    published guidelines.
  • The federal government cant negotiate or
    mandate pharmacy payment rates or manufacturer
    rebate levels

Provision of Notice Regarding Formulary Changes
  • Prior to removing/changing drug from formulary
    the plan must
  • Provide 60 days notice to prescribers, network
    pharmacies, pharmacists and other health plans
  • CMS will review and approve modifications
  • For enrollees, must provide either
  • Direct written notice at least 60 days prior to
    date the change becomes effective, or
  • At the time a refill is requested, provide a 60
    day supply of drug and written notice

Exception Requests
  • Enrollees or their authorized representative may
    request an exception when
  • A non-formulary drug is prescribed and is
    medically necessary
  • The cost-sharing status of a drug an enrollee is
    using changes
  • A drug covered under a more expensive
    cost-sharing tier is prescribed because the drug
    covered under the less expensive cost-sharing
    tier is medically inappropriate
  • The enrollee is using a drug that has been
    removed from the formulary
  • Ensures access to medically necessary Medicare D
    covered prescription drugs

Cost and Utilization Controls
  • Prior Authorization
  • Step Therapy
  • Quantity Limits
  • Frequency Limits
  • Generic Substitution
  • Drug Utilization Review-Prospective and
  • Tiered formulary design

Appeal Processes
  • 1st Step Plan Re-determination
  • 7 days to respond
  • 72 hours, if expedited
  • 2nd Step IRE Reconsideration
  • Independent Review Entity (IRE), CMS contractor,
    which reviews plan redeterminations
  • 7 days to respond
  • 72 hours, if expedited
  • 3rd Step Administrative Law Judge
  • Must satisfy minimum amount requirement
  • 4th Step Medicare Appeals Council
  • 5th Step Federal District Court

Characteristics of Medicare Population
Nursing Home/Assisted Living Resident Under Age
65 Disabled Dual Eligible Cognitive
Impairment Rural Fair to Poor Health1
Functional Limitation Low-Income lt 150 FPL
Excludes Part A only beneficiaries
Percentage of Total Medicare Population
Sources Kaiser Family Foundation based on
Medicare Current Beneficiary Survey, 1997-2002
and Low income estimate from CBO, July 2004
Issues for the Duals
  • What happens, when they
  • Ignore notices regarding Rx changes
  • Dont know how to use their assigned plan
  • Learn the drug Medicaid paid for isnt covered by
    their new Medicare plan
  • Have higher out of pocket costs for copays, non -
    covered drugs

Formularies Transition Process
  • Plans have flexibility, but CMS guidance expects
  • 1-time transition supply for new enrollees
  • Ambulatory 30 days
  • Nursing Home 90 to 180 days
  • 1-time temporary emergency supply for others
  • For changes in level of care (nursing home, acute
    hospital, hospital, etc.) or during appeals

Drug plans that want to serve Medicare
beneficiaries enrolling in the new prescription
drug benefit next year must meet strict standards
to assure that older and disabled Americans will
be able to make the transition to the new
coverage smoothly. Mark B. McClellan, March 16,
2005, CMS Press Release
Indiana Medicaid Specific Approach for Dual
  • Indiana Medicaid will continue to cover
    Medicare D excluded drugs to the extent that they
    are covered in the Medicaid program today.
    Current dual population estimated at 100,000
  • Examples
  • Over the counter drugs on the Indiana Medicaid
  • Agents for treating symptoms of cough/colds and
    prescription vitamins
  • Barbiturates and benzodiazepines

Everyone Agrees Its Difficult to Comprehend
all the Details
  • You choose a prescription drug plan and pay a
    monthly 35 premium. Okay, now it gets a little
  • - Readers Digest, April 2004

Decisions for Medicare Beneficiaries
Medicare Beneficiary
Do Not Enroll in Part D Plan
Enroll in Part D Plan
  • Medicare Advantage
  • HMO
  • PPO (regional)
  • Private
  • Traditional Medicare
  • Prescription Drug-Only Plan (PDP)

Apply for Low-Income Subsidy
No Rx Coverage (late enrollment penalty)
If Dual EligibleAuto-Enrolled
Creditable Employer Plan (no low-income
Social Security
  • Decisions to be Made
  • Premiums
  • Covered Drugs
  • Cost-Sharing

If meet income and asset test, qualify for
Medigap Coverage (but not creditable late
enrollment penalty)
Below 100 FPL (9,570 in 2005)
Below 135 FPL (12,920 in 2005) Assets
6,000/single 9,000/couple
Below 150 FPL (14,355 in 2005)
Assets 10,000/single 20,000/couple
Unfortunately, you have what we call no
Issues for Practicing Physicians
  • Assisting beneficiaries with understanding the
    new coverage available
  • Motivating patients to take action and apply for
    the benefit that comes closest to meeting their
  • Navigating multiple drug formularies
  • Coordinating prior authorizations appeals
  • Comprehending the ongoing changes that will
    likely occur

Medicare PrescriptionDrug Benefit Positive
  • Enhancement of existing Medicare benefit package
  • Access to subsidized prescription drug coverage
  • Improved availability and compliance with
    treatment regimens
  • Improved health and reduction of adverse health

Medicare Prescription Drug Benefit Timeline
  • January 21, 2005 - Final Rule Published
  • June 6 - Bid submission
  • July - Finalization pharmacy contracts
  • September 14 - PDPs announced
  • October 1 - Marketing begins
  • October 13 - Prescription Drug Plan Finder Tool
  • November 15 - Enrollment begins
  • January 1, 2006 - Benefit begins
  • May 15, 2006 Last day to enroll before late
    enrollment penalty

Sources of Information
  • CMS Website
  • http//
  • 1-800-Medicare
  • Social Security Administration
  • Look under Medicare Outreach
  • Kaiser Family Foundation
  • United States Pharmacopoeia (USP)