Part D, Medicare Advantage drug plans must install cost-sharing cap by 2025 in new drug price bill

New legislation would require Medicare Advantage and Part D prescription drug plans to install a monthly cap on out-of-pocket costs by 2025. (TaxRebate.org.uk)

Medicare Advantage and standalone Part D prescription drug plans must implement a maximum monthly cap on patient cost-sharing payments by the start of 2025, according to the latest version of new drug price reform legislation.

House Democrats released the legislative text for a series of reforms aimed at lowering prescription drug costs, including language on how many drugs will be subject to negotiation under Medicare. But the legislation includes new key requirements for payers as Democrats aim to curb drug costs for seniors in Medicare Part D.

The language is expected to be included in a massive $1.75 trillion social spending bill being hammered out by Democrats and that could be voted on in Congress in the next several weeks.

An earlier framework of the bill did not include price negotiations and other pharmaceutical industry reforms, but Democrats rushed over the past week to craft a deal that satisfies centrist concerns over innovation harms to the industry.

The legislative text creates a maximum monthly cap on co-pays for cost-sharing starting on Jan. 1, 2025.

Any Part D prescription drug sponsor and each MA organization must provide an enrollee with the option to pay any cost-sharing for drugs in the plan in monthly amounts that are capped.

A beneficiary can enroll in the monthly cap option at the beginning of the plan year or in any month during its plan year.

Insurers also have to notify a pharmacy during the plan year when a plan enrollee faces out-of-pocket costs of the option to enroll in the cap.

RELATED: Medicare Advantage premiums to decline slightly in 2022, Part D to rise by nearly 5%

But the language doesn’t prevent an insurer from collecting unpaid amounts from an enrollee who doesn’t pay the costs.

The bill also installs a yearly out-of-pocket cap of $2,000 on Part D costs starting in 2024. It would also cap copays for insulin products by no more than $35 in Part D starting the same year.

The legislation confirms the Department of Health and Human Services will repeal a controversial rule passed by the Trump administration that gets rid of the safe harbor for Part D drug rebates, leaving such rebates open to prosecution under federal anti-kickback laws. The rule finalized back in November 2020 would have created a new safe harbor for discounts offered at the point-of-sale such as the pharmacy counter.

The Biden administration delayed the rule’s implementation date, and, now, if the legislation becomes law, it will be fully repealed.

Subjecting drugs to negotiation

A major part of the proposal is to give Medicare the power to negotiate over the price of certain drug products, but only for a smaller amount than Democrats initially wanted.

Starting in 2025, Medicare can choose 10 drugs in Parts D or B to negotiate the price over. That number bumps up to 15 drugs in 2026 and 20 drugs in 2028. The drugs must be single-source products and a source of high Medicare spending.

Any product must also have been on the market for at least seven years before becoming eligible for negotiation and 10 years for any biologics.

The legislation does include exceptions for certain orphan drugs that treat rare disease and small biotech drugs, but only from 2025 through 2027.

The bill has already drawn major opposition from the pharmaceutical industry even before the text was released.

“Under the guise of ‘negotiation,’ it gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments,” said Stephen Ubl, the president and CEO of drug industry group Pharmaceutical Research and Manufacturers of America, in a statement Tuesday after a deal was announced.

But payers were more amenable to the agreement.

“Patients deserve more choices at lower costs,” according to a statement from insurance industry group America's Health Insurance Plans. “We need to ensure that any changes to Part D hold big pharma accountable and don’t raise premiums for seniors and patients.”