Unformatted text preview: Chapter 12 References Journal of Geophysical Research: Atmospheres 114(D5). doi:10.1029/2008JD009849. Available at:
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GCRP 2016. citing Deschênes, O. and M. Greenstone. 2011. Climate change, mortality, and adaptation:
Evidence from annual fluctuations in weather in the US. American Economic Journal: Applied
Economics 3(4):152-185. doi:10.1257/app.3.4.152.
GCRP 2016. citing Dixon, P.G., A.N. McDonald, K.N. Scheitlin, J.E. Stapleton, J.S. Allen, W.M. Carter, M.R.
Holley, D.D. Inman, and J.B. Roberts. 2007. Effects of temperature variation on suicide in five U.S.
counties, 1991-2001. International Journal of Biometeorology 51(5):395-403. doi:10.1007/s00484006-0081-4.
GCRP 2016. citing Fiore, A.M., V. Naik, D.V. Spracklen, A. Steiner, N. Unger, M. Prather, D. Bergmann, P.J.
Cameron-Smith, I. Cionni, W.J. Collins, S. Dalsøren, V. Eyring, G.A. Folberth, P. Ginoux, L.W.
Horowitz, B. Josse, J.-F. Lamarque, I.A. MacKenzie, T. Nagashima, F.M. O’Connor, M. Righi, S.T.
Rumbold, D.T. Shindell, R.B. Skeie, K. Sudo, S. Szopa, T. Takemura, and G. Zeng. 2012. Global air
quality and climate. Chemical Society Reviews 41:6663-6683. doi:10.1039/C2CS35095E.
GCRP 2016. citing Honda, Y., M. Kondo, G. McGregor, H. Kim, Y.L. Guo, Y. Hijioka, M. Yoshikawa, K. Oka,
S. Takano, S. Hales, and R.S. Kovats. 2014. Heat-related mortality risk model for climate change
impact projection. Environmental Health and prevenetive Medicine 19(1): 56-63.
GCRP 2016. citing IPCC. 2012. Managing the Risks of Extreme Events and Disasters to Advance Climate
Change Adaptation. A Special Report of Working Groups I and II of the Intergovernmental Panel on
Climate Change. [Field, C.B., V. Barros, T.F. Stocker, D. Qin, D.J. Dokken, K.L. Ebi, M.D. Mastrandrea,
K.J. Mach, G.-K. Plattner, S.K. Allen, M. Tignor, and P.M. Midgley (Eds.)] 582 pp. Cambridge
University Press: Cambridge, UK and New York, NY.
GCRP 2016. citing Mills, L.D., T.J. Mills, M. Macht, R. Levitan, A. De Wulf, and N.S. Afonso. 2012. Posttraumatic stress disorder in an emergency department population one year after Hurricane Katrina.
The Journal of Emergency Medicine 43(1): 76-82. doi:10.1016/j.jemermed.2011.06.124.
GCRP 2016. citing Osofsky, H.J., J.D. Osofsky, J. Arey, M.E. Kronenberg, T. Hansel, and M. Many. 2011.
Hurricane Katrina’s first responders: The struggle to protect and serve in the aftermath of the
disaster. Disaster Medicine and Public Health Preparedness 5:S214-S219. doi:10.1001/dmp.2011.53.
GCRP 2016. citing Penrod, A., Y. Zhang, K. Wang, S.-Y. Wu, and L.R. Leung. 2014. Impacts of future
climate and emission changes on U.S. air quality. Atmospheric Environment 89: 533-547.
GCRP 2016. citing Preti, A., G. Lentini, and M. Maugeri. 2007. Global warming possibly linked to an
enhanced risk of suicide: Data from Italy, 1974–2003. Journal of Affective Disorders 102(1-3):19-25.
GCRP 2016. citing Qi, X., S. Tong, and W. Hu. 2009. Preliminary spatiotemporal analysis of the
association between socio-environmental factors and suicide. Environmental Health 8:46.
doi:10.1186/1476-069X-8-46. 12-46 rebate—the share of gross drug sales offset by rebates
and other discounts—grew from around 10 percent in
2009 to nearly 60 percent by the second quarter of 2016
(Indianapolis Business Journal 2016). The extent to which
rebates and discounts offset price increases varies across
manufacturers, driven primarily by the mix of products
in their portfolios and the competitive pressures they face
(Credit Suisse 2015).
Pharmacy networks and postsale fees Plan sponsors try to encourage enrollees to use pharmacies
that dispense prescriptions at lower cost. For example, for
some non-Medicare employer plans, enrollees are required
to fill prescriptions within an exclusive network of retail
pharmacies, refill prescriptions by mail rather than through
retail pharmacies, and fill prescriptions with a 90-day
rather than a 30-day supply.
Part D law and CMS guidance limit plan sponsors’ ability
to use those approaches. Most notably, plan sponsors must
permit within their networks any pharmacy that is willing
to accept the sponsors’ terms and conditions; that is, plan
sponsors cannot use exclusive pharmacy contracts.20 Plan
sponsors must also demonstrate that their network of
pharmacies meets access standards.
Sponsors can, however, designate a subset of network
pharmacies that offer preferred (lower) cost sharing. The
strategy of designating certain “preferred cost-sharing
pharmacies” has the potential to lower costs for Medicare
and enrollees if it encourages enrollees to fill prescriptions
at more efficient pharmacies. Differences between cost
sharing at preferred pharmacies and other network
pharmacies can vary substantially among plans (Medicare
Payment Advisory Commission 2016b). In 2019, about 88
percent of beneficiaries enrolled in PDPs are in plans with
preferred cost-sharing pharmacies, down from over 99
percent of plans in 2018 (Fein 2019).
Tiered networks as a management tool have been
controversial because of past concerns that some enrollees
do not have adequate access to preferred pharmacies with
lower cost sharing. In addition, if LIS enrollees have less
opportunity to use preferred pharmacy networks, the tiered
network strategy could lead to higher Medicare spending
because Medicare pays for most or all of LIS enrollees’
cost sharing. Out of these concerns, CMS guidance
permits plans to offer lower cost sharing at preferred
pharmacies only if the approach does not raise Medicare payments (Centers for Medicare & Medicaid Services
2015a, Centers for Medicare & Medicaid Services 2014b).
Although Part D plan sponsors cannot set up exclusive
pharmacy networks, they can include other network
contract terms that try to achieve the same aims—
terms that have largely led to postsale payments from
pharmacies to plans. The terms can include amounts that
are a condition for participating as a preferred cost-sharing
pharmacy, periodic payment reconciliations related to
drug reimbursement rates, or performance-based fees
that are assessed on quality measures (Fein 2016).21 For
some pharmacies, postsale fees have made participation
in plan sponsors’ networks much less desirable because
the pharmacies have not been able to predict their ultimate
amount of reimbursement from plans.
Plan sponsors must report postsale pharmacy fees to
CMS in the same way they report manufacturers’ rebates.
According to CMS, pharmacy price concessions and
fees grew dramatically between 2013 and 2017, from
$229 million to $4 billion (Centers for Medicare &
Medicaid Services 2018l). Critics point out that when
Part D enrollees pay cost sharing in the deductible phase
or based on a percentage coinsurance at the pharmacy
before such fees are assessed, those cost-sharing amounts
are too high.
Specialty pharmacies Commercial plan sponsors often try to dispense high-cost
specialty drugs through an exclusive network of specialty
pharmacies. Many of the largest insurers and PBMs own
specialty pharmacies, and some encourage their clients to
dispense exclusively through that company. In Part D, plan
sponsors cannot set up a narrower network of specialty
pharmacies. With a few exceptions, Part D’s convenient
access standards apply to the dispensing of all types of
drugs, including specialty drugs.22 As with general retail
pharmacies, some Part D plan sponsors include terms
in their contracts with specialty pharmacies that include
postsale price concessions and fees.
Most specialty pharmacies fill prescriptions through
home delivery or deliveries to a convenient location.
Specialty pharmacies can help ensure that patients meet
specific clinical criteria through plans’ prior authorization
processes before dispensing prescriptions. They can also
reduce waste by, for example, initially dispensing a 7- or
14-day supply and observing the patient for side effects,
treatment effectiveness, and adherence before providing Report to the Congress: Medicare Payment Policy | March 2019 403 Chapter 12 References GCRP 2016. citing Ruuhela, R., L. Hiltunen, A. Venäläinen, P. Pirinen, and T. Partonen. 2009. Climate
impact on suicide rates in Finland from 1971 to 2003. International Journal of Biometeorology
53(2):167-175. doi:10.1007/s00484-008- 0200-5.
GCRP 2016. citing Schulte, P.A., A. Bhattacharya, C.R. Butler, H.K. Chun, B. Jacklitsch, T. Jacobs, M.
Kiefer, J. Lincoln, S. Pedergrass, J. Shire, J. Watson, and G.R. Wagner. 2016. Advancing the
Framework for Considering the Effects on Climate Change on Worker Safety and Health. Journal of
Occupational and Environmental Hygiene 13(11):847-865.
GCRP 2016. citing Sheffield, P.E. and P.J. Landrigan, 2011. Global climate change and children’s health:
Threats and strategies for prevention. Environmental Health Perspectives 119:291-298.
doi:10.1289/ehp.1002233. Available at: . (Accessed: February
GCRP 2016. citing Tai, A.P.K., L.J. Mickley, and D.J. Jacob. 2012. Impact of 2000–2050 climate change on
fine particulate matter (PM2.5) air quality inferred from a multi-model analysis of meteorological
modes. Atmospheric Chemistry and Physics 12:11329-11337. doi:10.5194/acp-12-11329-2012.
Available at: .
(Accessed: March 5, 2018).
GCRP 2016. citing Trail, M., A.P. Tsimpidi, P. Liu, K. Tsigaridis, J. Rudokas, P. Miller, A. Nenes, Y. Hu, and
A.G. Russell. 2014. Sensitivity of air quality to potential future climate change and emissions in the
United States and major cities. Atmospheric Environment 94:552-563.
GCRP 2016. citing Val Martin, M., C.L. Heald, J.F. Lamarque, S. Tilmes, L.K. Emmons, and B.A. Schichtel.
2015. How emissions, climate, and land use change will impact mid-century air quality over the
United States: A focus on effects at National Parks. Atmospheric Chemistry and Physics 15:28052823. doi: 10.5194/acp-15-2805-2015. Available at: . (Accessed: March 6, 2018).
GCRP. 2017. Climate Science Special Report: Fourth National Climate Assessment. U.S. Global Change
Research Program. [Wuebbles, D.J., D.W. Fahey, K.A. Hibbard, D.J. Dokken, B.C. Stewart, and T.K.
Maycock (Eds.)]. U.S. Government Printing Office: Washington, D.C. 477 pp. doi:10.7930/J0J964J6.
Available at: .
(Accessed: February 16, 2018).
GCRP 2017. citing Ashley, W.S., M.L. Bentley, and J.A. Stallins. 2012. Urban-induced thunderstorm
modification in the southeast United States. Climatic Change 113:481-498. doi:10.1007/s10584-0110324-1.
GCRP 2017. citing IPCC. 2013a. Climate Change 2013: The Physical Science Basis. Contribution of
Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change
[Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and
P.M. Midgley (Eds.)]. Cambridge University Press: Cambridge, United Kingdom and New York, NY,
USA, 1535 pp. doi:10.1017/CBO9781107415324. Available at:
. (Accessed: February 21, 2018). 12-47 a 30-day supply. Specialty pharmacies also play a role in
patient education, monitoring, and data reporting. They
often employ nurses to provide counseling by telephone
about side effects and to monitor adherence. Specialty
pharmacies may also facilitate outreach to patient
A variety of ownership types have evolved to dispense
specialty drugs. Owners of specialty pharmacies include
pharmacy chains, PBMs, health plans, drug wholesalers,
hospital systems, and prescriber practices, or the pharmacy
can operate as an independent business. Although most
manufacturers do not own specialty pharmacies, a number
of drug makers pay fees to specialty pharmacies and have
contracts that limit which ones may dispense their drug.
These relationships can result in specialty pharmacies with
financial incentives that align with manufacturers.
Recent regulatory changes to Part D
In 2018, CMS finalized a number of regulatory changes in
Part D and proposed other steps for stakeholder review and
comment. Many of those measures were designed to make
the tools that plan sponsors use in Part D more similar to
those already available for managing pharmacy benefits in
For example, CMS now allows plan sponsors to add a
newly approved generic to their formularies and remove or
change the tier status of a therapeutically equivalent brandname drug at any point during the benefit year without
prior approval. The new generic would have to be offered
at the same or lower cost sharing and with the same or less
restrictive utilization management criteria, and beneficiaries
must receive notification. This is consistent with the
Commission’s 2016 recommendation that CMS streamline
the agency’s process for reviewing formulary changes
(Medicare Payment Advisory Commission 2016a).
In July 2018, CMS issued guidance for the 2019 benefit
year allowing plan sponsors to use different utilization
management requirements for a drug depending on a
patient’s indication (Centers for Medicare & Medicaid
Services 2018j). As an example, some tumor necrosis
factor (TNF) blockers have been licensed by the Food
and Drug Administration (FDA) for a broader range of
indications than others. Previously, the manufacturer of
the product with more indications would have greater
leverage in negotiations for plan formulary placement and
rebates. Under indication-specific criteria, however, plan
sponsors may require a patient with, for example, Crohn’s
disease to try a different TNF blocker that is approved for 404 The Medicare prescription drug program (Part D): Status report fewer indications (but includes Crohn’s) before covering
the other agent. That approach gives sponsors leverage to
encourage more price competition among drug therapies.
CMS also noted that beginning with benefit year 2020,
the agency will allow plan sponsors to limit on-formulary
coverage of certain drugs by indication (Centers for
Medicare & Medicaid Services 2018i).
Alternative therapies that can be used to treat the same
condition sometimes fall across medical and pharmacy
benefits. As health plans have expanded their pharmacy
benefit management capabilities and acquired large
warehouses of member data, those organizations have
begun looking to manage specialty drugs across pharmacy
and medical benefits. Some entities contend that by doing
so, they can introduce greater price competition among
manufacturers in certain drug classes. In August 2018,
CMS issued guidance that, for 2019 and subsequent years,
allows MA–PDs to use step therapy for managing Part B
drugs, under which plan sponsors can require enrollees
to try a drug covered under either Part B or Part D before
using a Part B therapy for the same indication (Centers for
Medicare & Medicaid Services 2018f). Drug pricing
At all levels of the drug supply and distribution channels,
there are incentives that drive prices higher because
payments for pharmaceutical products or other services
that are provided in conjunction with the distribution of
pharmaceutical products are often based on a percentage
of the drugs’ prices (Diplomat Specialty Pharmacy 2017,
Fein 2018, Feldman 2018, Garthwaite and Morton 2017).
Over the past decade, manufacturers have shifted their
development pipelines toward higher cost drugs and
biologics. Meanwhile, participants in drug supply and
distribution channels grew to rely on price inflation for
revenue growth (Cahn 2017, Fein 2017, Lopez 2016, Sell
2015). Those factors combined with the increasing market
concentration among participants in the drug supply and
distribution channels put upward pressure on both prices
and rebates. Until recently, the result was aggressive growth
in drug prices at the point of sale (POS), which determines
gross Part D spending (i.e., aggregate amounts paid at
the pharmacy). There has also been a growing divergence
between POS prices and net prices (net of postsale rebates
and discounts from manufacturers and pharmacies (see
text box on the effects of rebates, pp. 406–407)). This ...
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