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High Cost Sharing and Specialty Drug Initiation Under Medicare Part D: A Case Study in Patients With Newly Diagnosed Chronic Myeloid Leukemia
Jalpa A. Doshi, PhD; Pengxiang Li, PhD; Hairong Huo, PhD, MS; Amy R. Pettit, PhD; Rishab Kumar; Brendan M. Weiss, MD; and Scott F. Huntington, MD, MPH

High Cost Sharing and Specialty Drug Initiation Under Medicare Part D: A Case Study in Patients With Newly Diagnosed Chronic Myeloid Leukemia

Jalpa A. Doshi, PhD; Pengxiang Li, PhD; Hairong Huo, PhD, MS; Amy R. Pettit, PhD; Rishab Kumar; Brendan M. Weiss, MD; and Scott F. Huntington, MD, MPH
A Medicare claims analysis of patients newly diagnosed with chronic myeloid leukemia revealed that high cost sharing was associated with reduced and/or delayed tyrosine kinase inhibitor initiation under Part D.
Second, although 100% sample Medicare claims should include data for all beneficiaries who accessed TKIs through their Part D benefit (barring coding errors or omissions), we note 2 circumstances that may not be reflected in the claims data. On one hand, our data set did not capture patients who may have been receiving medication outside of their Part D benefit, such as through a manufacturer program that provides free or reduced-cost prescription drugs. Thus, it is possible that some patients who were classified as not initiating treatment, or as delaying initiation, may have been receiving medication via other means that would not have resulted in a Medicare Part D prescription claim.21 Regardless, our results are an accurate reflection of access issues under the Medicare Part D program, which was specifically created to improve access to drug therapy. On the other hand, some non-LIS patients in our sample who accessed TKIs under Medicare Part D may have been able to do so only because of supplemental cost-sharing help from patient assistance programs sponsored by nonprofit foundations. (Federal law constrains manufacturer-sponsored patient assistance programs from offering cost-sharing assistance to Part D beneficiaries.21) In those cases, our results would underestimate the true adverse impact of high cost sharing. In both circumstances, the need to seek additional assistance has the potential to add stress at an overwhelming time, when individuals and families are coping with the impact of a new cancer diagnosis.

Third, in order to isolate a newly diagnosed population that would be subject to high cost sharing, we required that our sample be diagnosed during Medicare Part D’s initial coverage period. As a result, our patient population may have been healthier overall than patients newly diagnosed with CML who did not meet this criterion. That is, patients who had already reached the initial coverage limit through spending on other pharmaceutical treatment (presumably due to the number and/or severity of other medical conditions) were excluded from our sample. A sensitivity analysis examining patients who received a new diagnosis of CML at any point during the coverage year showed consistent results, however, suggesting that this sampling decision did not significantly limit the generalizability of our findings. Finally, since Medicare claims available from CMS only include data on Medicare fee-for-service patients, our results may not be generalizable to Medicare Advantage patients.

Policy Implications

Insurance coverage, as per economic theory, is intended to help protect patients against the risk of catastrophic loss, where the loss itself is a relatively rare and low-likelihood event, and beneficiaries of that coverage are not likely to alter their behavior in the presence of insurance.12 The oncology context is an excellent example of how insurance coverage can be used to reduce the risk of high spending for patients: many specialty drugs are very expensive, and they are often used to treat conditions that have a low probability of occurring. With 1% to 5% of patients using specialty drugs,22-24 insurance can serve its intended purpose to spread the risk of such occasional losses over a large insured population so that sick patients are not burdened with inordinately high costs for potentially life-saving or life-extending treatments. The potential for such burden is particularly of concern under Medicare Part D, where beneficiaries who do not qualify for low-income subsidies face specialty tier cost sharing of 25% to 33% in the initial coverage phase followed by 45% cost sharing in the coverage gap phase. Individuals currently need to spend up to $4700 out of pocket before their cost sharing drops to 5% during the catastrophic coverage period.4 Although the 2010 Affordable Care Act is scheduled to gradually close the Part D coverage gap by 2020, patients will still be responsible for 25% to 33% coinsurance during the coverage gap phase, effectively extending the high cost sharing that is currently in place for specialty drugs during the initial coverage phase. Thus, patients will continue to face financial barriers that may inadvertently discourage use of high-value treatments.5

Our results point toward the critical need for regulators to consider approaches to provide Medicare Part D patients with additional protection against extremely high cost sharing for these medications. Several policy solutions may be considered. First, CMS should reconsider its policies permitting assignment of drugs to Part D specialty tiers based solely on the fact that their monthly acquisition cost exceeds a certain threshold, as well as the application of across-the-board high levels of coinsurance for all specialty drugs and for all patients requiring these drugs. Specialty drug cost sharing that accounts for medication value, as is the case with value-based insurance design approaches, may be more appropriate than these current one-size-fits-all Part D policies, wherein cost sharing is directly a function of the medication cost.23 That is, it makes sense to reduce or limit cost sharing to modest amounts so as to remove it as a barrier to patient initiation of and adherence to high-value specialty medications. Policy changes to lower cost sharing for high-value specialty drugs may be financially feasible, given a recent actuarial analysis that indicated that the cost of eliminating Part D specialty tiers could be offset by implementing relatively minor increases in traditional 3-tiered co-payments.24

Second, creating greater consistency in out-of-pocket costs throughout the benefit year has the potential to reduce burden on patients who are currently subject to front-loaded out-of-pocket costs during the Part D initial coverage period and coverage gap. The complex and variable cost sharing required by the current Medicare Part D benefit structure likely poses challenges, particularly for elderly beneficiaries who are on a fixed income. Our study documented a mean out-of-pocket payment for the first TKI prescription fill of ~$2600 or more; this amount far exceeds the average monthly Social Security benefit (<$1350), which provides a substantial portion of income for many Medicare beneficiaries.25

To help preserve the stability of monthly budgets for Medicare beneficiaries, approaches allowing patients to distribute total out-of-pocket costs more evenly throughout the benefit year should be considered. This would be analogous to strategies used to help individuals and families manage energy bills by distributing high winter heating costs throughout the calendar year. Finally, given that entry into the catastrophic coverage period still leaves Medicare Part D beneficiaries responsible for 5% cost sharing for the remainder of the calendar year—resulting in sums that can be substantial for specialty medications (eg, ~$350 per monthly TKI fill)—CMS should consider annual out-of-pocket maximums akin to those in the health insurance exchange plans and many private insurance plans. A combination of these approaches, which would distribute out-of-pocket costs as well as limit annual out-of-pocket liabilities for beneficiaries, has the potential to not only reduce the risk of initiation delays, but also to reduce cost-related adherence and persistence problems.26,27

As more specialty drug treatments for cancer become available and part of standard care, there is increasing need to examine the impact of out-of-pocket costs on treatment initiation, adherence, and continuity of care, and to document how delays or interruptions in care impact clinical outcomes and overall healthcare costs. Our study suggests out-of-pocket costs may limit and/or delay initiation of life-sustaining oral medication for Medicare patients with newly diagnosed CML, providing evidence that policy changes are needed to ensure optimal access to specialty medications under Medicare Part D.

Author Affiliations: Division of General Internal Medicine, Perelman School of Medicine (JAD, PL, HH), and Leonard Davis Institute of Health Economics (JAD, PL), and Center for Public Health Initiatives (ARP), and School of Arts and Sciences (RK), and Division of Hematology-Oncology, Department of Medicine, Abramson Cancer Center and Perelman School of Medicine (BMW), University of Pennsylvania, Philadelphia, PA; Section of Hematology, Department of Medicine and Cancer Outcomes, Public Policy, and Effectiveness Research (COPPER) Center, Yale School of Medicine (SFH), New Haven, CT.

Source of Funding: Pharmaceutical Research and Manufacturers of America (PhRMA), Washington, DC.

Author Disclosures: Dr Doshi reports consultancy or paid advisory board membership for Alkermes Inc, Forest Laboratories, and Ironwood Pharmaceuticals; grant funding from Amgen Inc, Humana Inc, Janssen, National Pharmaceutical Council, Pfizer Inc, PhRMA, and Sanofi; and a spouse who owns stock in Merck & Co Inc and Pfizer Inc. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (JAD, PL, SFH); acquisition of data (JAD, PL, RK); analysis and interpretation of data (JAD, PL, HH, ARP, RK, BMW, SFH); drafting of the manuscript (JD, PL, HH, ARP, BMW, SFH); critical revision of the manuscript for important intellectual content (JAD, PL, ARP, RK, BMW, SFH); statistical analysis (PL, HH, SFH); obtaining funding (JAD); administrative, technical, or logistic support (JAD, ARP); and supervision (JAD, PL).

Address correspondence to: Jalpa A. Doshi, PhD, Associate Professor of Medicine, Director, Economic Evaluations Unit, Center for Evidence-based Practice, and Director, Value-based Insurance Design Initiatives, Center for Health Incentives and Behavioral Economics, University of Pennsylvania, 1223 Blockley Hall, Philadelphia, PA 19104. E-mail:

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27. Rice T, Matsuoka KY. The impact of cost-sharing on appropriate utilization and health status: a review of the literature on seniors. Med Care Res Rev. 2004;61(4):415-452. 
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