Medicare Part D Patients May Pay More Than $15K for Their Specialty Medications
Key takeaways:
Many Americans enrolled in Medicare Part D will face high yearly out-of-pocket costs for some expensive specialty medications, which can total upwards of $10,000.
Savings between Medicare Part D plans can significantly vary for the same drug, indicating the need for patients to plan shop during enrollment season.
Out-of-pocket costs depend on the retail medication cost and which Medicare Part D phase you are in.
Insurance isn’t cutting it anymore, especially for the millions of Americans that currently take a specialty medication.
According to new research from GoodRx, many Medicare Part D enrollees face high out-of-pocket costs for popular specialty medications, totalling upwards of $10,000 annually in some cases. On top of that, prices for specialty drugs in certain Medicare plans differ by thousands of dollars, highlighting the importance of patients shopping around.
The following are 20 common specialty medications filled by Medicare Part D enrollees. Across plans covering the drugs, on average the drugs will cost Medicare patients at least $3,000 annually in 2021, with one drug costing more than $17,000.
It seems counterintuitive. Consumers have been told that if they are covered by insurance, they should be paying a reasonable price for their medications. But that’s just not the case, and as shown above, patients are forced to shell out thousands of dollars a year for a lifesaving medication.
Why? There are a lot of factors, and it’s complicated. From the Medicare plan someone choses, to the distinct phase of their plan, to the price of the drug — the cost is affected by it all.
Below, we walk through what specialty drugs are, how their cost can vary based on Part D plan and phase, and why it’s so important for patients to shop around for their Part D plan every enrollment season.
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Specialty medications: What are they, and why are they so expensive?
The definition of a specialty medication varies. But according to IQVIA and the Congressional Budget Office (CBO), specialty medications must treat a chronic, complex, or rare disease and have at least four of the following seven characteristics:
Cost at least $6,000 per year in 2015
Be initiated or maintained by a specialist
Be administered by a healthcare professional
Require special handling in the supply chain
Be associated with a patient payment-assistance program
Be distributed through nontraditional channels (such as a specialty pharmacy), or require monitoring or counseling either because of significant side effects or because of the type of disease being treated.
The Centers for Medicare & Medicaid Services places a drug on a specialty tier if it costs more than $670 per 30-day fill.
The market for specialty drugs is huge. In 2019, the CBO analyzed spending on specialty drugs in Medicare Part D and Medicaid. They found that net spending on specialty drugs in Medicare Part D went from $8.7 billion in 2010 to $32.8 billion in 2015, and the average annual net spending tripled per person from $11,330 (in 2010) to $33,460 (in 2015).
And the massive specialty market is only going to continue to grow. According to research done by IQVIA, specialty medications will soon make up half of total medication spending, and in 2018, specialty prescriptions were 127 million (up by 15 million since 2014). Although specialty medications only make up approximately 2% of drugs, they grew by over 5% for the second year in a row.
So why are specialty medications so expensive? There are couple of reasons:
The cost to research and develop complex drugs is relatively high, so the high pricing reflects what manufacturers are trying to recoup from their investment.
The lack of generics for these complex medications also keeps specialty drug prices high since it limits competition within the market.
Insurers are trying to lessen the cost of specialty drugs by putting more of the costs on the patient’s shoulders with coinsurance. High coinsurance costs and the lack of coverage by insurers make them expensive for patients.
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How Medicare Part D phases affect out-of-pocket prices for specialty drugs
Medicare Part D has four phases of coverage. The first phase is the deductible phase, followed by the initial coverage phase, the “donut hole phase,” and finally the catastrophic phase. The patient usually will pay completely out of pocket in the deductible phase before having some coverage on their prescription costs. After the initial coverage phase, a patient reaches the coverage gap phase and usually pays more out of pocket.
A patient reaches the coverage gap or “donut hole” phase after they’ve spent at least $4,130 on covered drugs in 2021. Although the donut hole was technically closed in 2020, enrollees will still pay up to 25% of the cost of the plan’s covered brand drugs.
To highlight just how different the out-of-pocket price can be in each phase, the GoodRx Research Team observed the annual out-of-pocket costs for the 20 most commonly filled drugs for a single Medicare Part D plan: Aetna Medicare SilverScript Choice, a popular plan covering more than 445,000 beneficiaries in 2021.
As shown above, each Medicare phase plays a huge role in the out-of-pocket burden on a patient, but so does the retail price of the medication, which is the negotiated price of a drug between a plan and pharmacy. In fact, the medication’s retail price will dictate how fast a Medicare Part D enrollee will move through the coverage phases and therefore how much they will pay.
In the catastrophic phase, a patient will pay 5% of their retail medication cost per 30-day fill. In the SilverScript plan shown above, a patient taking Revlimid, used to treat multiple myeloma and lymphoma, will reach the catastrophic phase in their first month of coverage because the retail price for a 30-day fill is incredibly expensive ($26,337 at preferred in-network pharmacies). So even though patients have only a 5% cost-sharing responsibility, they will pay an estimated annual total of $15,321 in the catastrophic phase alone, because they will need to pay 5% of the retail price monthly for the rest of the year.
However, a drug like Isentress has a lower monthly retail price ($1,832) under the SilverScript plan. So a patient would not reach the catastrophic phase until the sixth month of coverage, meaning they will pay the least amount in the catastrophic phase outside the deductible phase.
Why it pays to shop around for a Part D plan
It’s clear that even with insurance, patients are going to spend a lot out of pocket on their specialty medications. Luckily, there is something they can do to mediate the cost: shop around.
According to our research, the average annual out-of-pocket cost for Revlimid across Medicare Part D plans is $17,142. But depending on the plan an enrollee is covered under, they could pay the max annual out-of-pocket annual cost for Revlimid, $20,013, or the minimum at $2,818. That’s almost an $18,000 difference in price.
What’s more, all drugs except Copaxone had a difference of at least $2,000 between their maximum and minimum annual out-of-pocket costs. Half of the drugs had a $3,500 or more difference in out-of-pocket costs between the maximum and minimum plans.
A Medicare Part D patient who is newly diagnosed with multiple myeloma will hopefully be on a plan where they are near the minimum out-of-pocket costs for Revlimid; otherwise, they may be facing a considerable amount to pay each year.
Some studies show Revlimid has a 41% improvement in overall survival for patients compared to those treated with a placebo. It may also increase patients’ time without their disease worsening from 19 to 23 months up to 33 to 41 months. However, since this medication is not a cure for the condition, the patient is paying what could be over $15,000 per year for a treatment that, at best, will extend their life.
The same difference is also seen when looking at the maximum and minimum 30-day supply costs for Revlimid. A patient could pay as little as $10 for a fill or as much as $4,6467 for a single fill. This significant difference in annual out-of-pocket cost is both due to the difference between Medicare Part D plans, but also the variation in price due to cost-sharing differences across phases of coverage within a plan.
Ibrance, like Revlimid, costs as little as $10 for a 30-day supply or as much as $4,443, depending on the patient’s plan and phase of coverage. And Biktarvy, Enbrel, and Humira all have a potential minimum $10 out-of-pocket cost for a 30-day supply or a maximum cost of over $2,000.
The difference in the range of minimum and maximum 30-day supply costs is significant and highlights just how important it is for a patient to pick the best plan for the medication they are prescribed. Even within plans, phase of coverage will drive variation in month-to-month, out-of-pocket prices.
Summing it all up
This data shows just how substantial the cost difference can be between Medicare Part D plans in terms of coverage for a specific medication. It is in any enrollee’s best interest to shop around and compare plans based on the medication they know they will be prescribed.
During open enrollment and special enrollment periods, you can search for available Medicare Part D plans according to your zip code and compare drug costs among plans here. You will need to know the following information when comparing drug costs across plans: name, dosage, quantity, and frequency of the medication.
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Co-contributors: Diane Li, Amanda Nguyen, PhD, Tori Marsh, MPH
Methodology
Top-filled specialty drugs: We identified the 20 top-filled specialty drugs based on the most recent data available on the Medicare Part D Spending Dashboard (2019). Our final cohort of drugs included for the analyses are: Biktarvy (50 mg/200 mg/25 mg tablet), Copaxone (40 mg/ml syringe), Descovy (200 mg/25 mg tablet), Enbrel (50 mg sureclick), Forteo (2.4 ml pen), Genvoya (150 mg/150 mg/200 mg/10 mg tablet), Humira (40 mg/0.4 ml pen), Ibrance (125 mg capsule), Imbruvica (140 mg capsule), Isentress (400 mg tablet), Prezcobix (800 mg/150 mg tablet), Prezista (800 mg tablet), Revlimid (10 mg capsule), Tecfidera (240 mg capsule), Tivicay (50 mg tablet), Triumeq (600 mg/50 mg/300 mg tablet), Truvada (200 mg/300 mg tablet), Xeljanz (5 mg tablet), Xifaxan (550 mg tablet), and Xtandi (40 mg capsule).
Estimated out-of-pocket costs for top-filled specialty drugs: All Medicare Part D estimated out-of-pocket (OOP) costs were ascertained using the Centers for Medicare & Medicaid Services (CMS) Prescription Drug Plan Formulary, Pharmacy Network, and Pricing Information files. These data include specific formulary structures, benefits, plans, and networks, and they are updated monthly and quarterly. We used 2021 Quarter 1 files in our analysis. Our analysis does not include National PACE plans, employer-sponsored plans, and demonstration plans per Medicare’s documentation.
We first excluded Medicare-Medicaid Plans and any Special Needs Plans (SNPs) plans. For all included plans, we then estimated the retail price of a drug using the unit cost for in-area pharmacies, multiplying it by the appropriate quantity for a 30-day supply and factoring in in-area standard/preferred pharmacy dispensing fees. For each plan and each specialty drug, we estimated the OOP cost at standard/preferred pharmacies over the course of the year using the estimated retail cost of the drug and the plan structure information (details such as the deductible, initial coverage limit, etc). We specifically simulate a patient filling a 30-day supply of a drug each month from January to December. It is important to note that the OOP costs are estimated with the assumption that a patient is only taking that specific drug throughout the course of the year. In addition, the OOP costs do not include the plan’s premium cost. This analysis does not factor in the prices of the drugs for plans that do not cover an included drug.
We additionally display the annual cost of specialty drugs for Aetna Medicare Silverscript Choice because it is one of the most enrolled plans as of March 2021. The enrollment information for Medicare Part D plans are obtained from the enrollment files.
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References
Abbott, K., et al. (2019). Policy options for addressing the high cost of specialty pharmaceuticals. Global Health Journal.
Anderson-Cook, A., et al. (2019). Prices for and spending on specialty drugs in Medicare Part D and Medicaid. Congressional Budget Office.
CMS.gov. (2023). Medicare Advantage/Part D contract and enrollment data.
CMS.gov. (2023). Prescription drug plan formulary, pharmacy network, and pricing information files for order.
Medicare.gov. (n.d.). Costs in the coverage gap.
Medicare Interactive. (n.d.). Phases of Part D coverage.
Medicare Interactive. (n.d.). The Part D donut hole.
Multiple Myeloma Research Foundation. (n.d.). Treatments for multiple myeloma.
IQVIA Institute. (2019). Medicine use and spending in the U.S.: A review of 2018 and outlook to 2023.
