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IRA Will Shift Cost Burn to Part D Plans in 2025, Says Melissa Andel | AMCP 2024


One result of the Inflation Reduction Act shifting a greater proportion the cost of drugs during the catastrophic phase of coverage to the Part D plans result may be narrower formularies.

Melissa Andel, MPP, principal of CommonHealth Solutions LLC, moderated a session today on the Inflation Reduction Act (IRA) and its latest updates, as well how plans and manufacturers are responding to it shaping their strategies moving forward.

Andel said the IRA provision that puts a $2,000 cap on Part D out-of-pocket costs is a major change to the Part D program but so are changes in who shoulders the costs of drugs in the so-called catastrophic phase of coverage when the patient no longer has out-of-pocket costs. In the past, the federal government covered 80% of the drugs in the catastrophic phase, Andel explained.

“Before, you had a perverse incentive, as a Part D plan sponsor, to move a beneficiary through the different phases of the benefit into catastrophic as quickly as you could, because then the government would be responsible for 80% of the costs,” she added.

In 2025, the government’s share drops to 20%, the Part D plans’ share will increase to 65% with the rest falling to drug manufacturers in the form of discounting. The IRA also puts limits on premium increases, so plans cannot simply offset the added cost with higher premiums, Andel said. Moreover, the $2,000 cap on out-of-pocket will mean that more beneficiaries will have drug costs that will put them into the catastrophic phase of coverage.

“From a manufacturer perspective and from a beneficiary and patient advocacy perspective, there are questions about what formularies in 2025 are going to look like. How much narrower are they going to be relative to where they are now? And is that where plans are going to look to help control some of those costs?” Andel said.

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