Down the Medicare Part D Rabbit Hole

F. Perry Wilson, MD, MSCE


May 29, 2019

Welcome to Impact Factor, your weekly dose of commentary on a new medical study. I'm Perry Wilson.

This week, we get some insight into how ineffective government policy can be in the face of exorbitant drug pricing, courtesy of this little research letter[1] appearing in the Journal of the American Medical Association.

To understand the article, you need to recall a few basic facts. In 2010, Medicare Part D had the infamous "donut hole," which worked like this:


After an initial deductible, patients were required to pay 25% of the price of their medications, up to $2830. After that point, they were responsible for 100% of the price, up until $6440, when Medicare would cover all but 5% of the drug costs.

It was... unpopular. But that donut hole has been filled since 2010. Here is the state of play as of 2018:


You can see that the donut hole is a bit smaller, going up to $5000. And patients are only responsible for [35%] of the costs while they are in it.

This is better, right? Well, it turns out that closing the donut hole hardly matters in an era of $10,000-a-month prescriptions.

The article examines out-of-pocket costs for oral anticancer drugs—think sorafenib and vorinostat. Despite substantive closing of the donut hole, Medicare patients were spending more money to get these drugs in 2018 than they were in 2010—on average, $1600 more per year. And yes, that accounts for inflation.

But that's just the average. Annual out-of-pocket spending for a patient taking lenalidomide, often used to treat multiple myeloma, was $11,000 in 2010. It's $15,000 today.

What's happening? Well, the prices of the drugs are increasing. In 2010, lenalidomide cost $12,000 per month. It costs $21,000 per month today. In fact, of 54 orally available anticancer drugs on the market in 2018, only three have a lower list price today than when they first came on the market.


Virtually every single drug in this class gets more expensive year after year that it's on the market.

And when I say expensive, I mean expensive: 48 out of the 54 medications cost more than $10,000 per month, and 21 cost more than $15,000 per month.

And that's why that donut hole closure doesn't matter much. For example, a patient taking pomalidomide (another anti-myeloma agent) starting on January 1, 2018, would hit the donut hole after their first day of therapy.


They would reach the other side of the donut hole on January 5, which means that for the other 360 days of the year, they are in catastrophic coverage territory. Yes, that means they are only responsible for 5% of the cost of the drug, but that 5% adds up to $15,000 per year.

I know that not everyone is taking these drugs all year, but the point is that even catastrophic coverage can't help you when drugs are this expensive.

Now it may seem that the obvious solution is to have some maximum out-of-pocket limit for Medicare beneficiaries. But we need to recognize that that ultimately shifts the costs from the patient to the government—ie, all of us. This is unsustainable.

The issue can really only be addressed two ways: (1) by deciding as a society that we find it acceptable that certain drugs are only available to patients who can afford them—not a solution I'm comfortable with—or (2) by regulating the price of drugs directly. Any other solution is simply robbing Peter to pay Pfizer.


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