Hep C drugs could increase Medicare Part D spending by 11% in 2015

August 12, 2014

If 15% to 30% of HCV-infected beneficiaries receive treatment in 2015 with the cost of treatment averaging $84,000, Medicare Part D could increase between $2.9 billion and $5.8 billion

The federal government’s cost for Medicare Part D will increase between $2.9 billion and $5.8 billion if 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.

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“Payers (PDP sponsors) are somewhat concerned about the increase in cost but the government is paying the bulk of [it]," says Steve Kaczmarek, principal and consulting actuary, Milliman. "Although there are drugs on the market that have higher costs, they are used to treat conditions that are not as prevalent as Hepatitis C. With a potential patient base of 3.2 million patients in the U.S., this issue has caught the attention [...] due to its sheer magnitude."

According to Kaczmarek, a majority 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. He continues by saying that the findings of the study will impact taxpayers and Part D sponsors more than MCOs or hospital decision-makers. 

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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.”

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