Medicare Rx Formularies Would Cover All Drug Classes Under Thomas Bill

Insurance companies providing drug benefits under the House Republican Medicare plan would have to include all therapeutic classes on their formularies.

"The formulary must include drugs within all therapeutic categories and classes of covered outpatient drugs, although not necessarily all drugs within such categories and classes," Rep. Thomas' (D-Calif.) "Medicare Rx 2000" bill states.

The bill requires that sponsors of a prescription drug plan under a new Medicare Part D would have to establish a pharmacy and therapeutics committee to develop and maintain the formulary. The P&T committee will include "at least one physician and at least one pharmacist," the bill specifies. "The sponsor shall make available, through an Internet website and in writing upon request, information on specific changes in its formulary," the bill states.

A process would be set up for participants to "appeal to obtain coverage for a medically necessary covered outpatient drug" if the physician concludes that the formulary drug is "not effective for the enrollee or has significant adverse effects for the enrollee."

Thomas introduced HR 4680 June 15. The Republican leadership wants to move the bill to floor vote by July 4 (¹ (Also see "Thomas Medicare Plan Attracts Two Border-State Democrats As Co-Sponsors" - Pink Sheet, 19 Jun, 2000.)).

The Part D program would provide coverage for all products currently covered by Medicaid (including drugs, biologics and insulin). The bill specifically mandates coverage of prescription smoking cessation agents, which are excluded from coverage under Medicaid. Products already covered under Medicare Parts A & B would not be included in the program.

Cost and utilization management programs "including appropriate incentives to use generic drugs" would be used by plan sponsors, the bill states. Sponsors would establish quality assurance controls and measures to reduce medical errors and adverse drug reactions.

Plans will issue a card to beneficiaries for "access to negotiated prices including applicable discounts," the bill states. The plans will sign up "sufficient numbers of pharmacies" for access by plan participants. Mail order pharmacies will also be accessible by enrollees.

The Medicare drug bill provides a benefit with an actuarial value of $740, Thomas said.

The bill defines a standard coverage package for 2003 as a $250 deductible with a 50% co-payment up to $2,100 and an annual out of packet cap of $6,000. Thomas estimated that monthly premiums would be $35-$45. The standard benefit is indexed to the inflation rate of "covered outpatient drugs in the U.S. for Medicare beneficiaries."

Plans may offer any coverage that is "actuarially equivalent to the standard coverage"; "provides coverage the unsubsidized value of which is at least equal to the unsubsidized value of the standardized coverage"; "is designed to provide, using an actuarially representative pattern of utilization, for the payment of the initial benefit that is at least equal to the standard benefit"; and "limits overall out-of-pocket spending" to the same amount as the standard package.

Beneficiaries with incomes under 135% of the federal poverty level would receive full direct subsidies to purchase a private drug benefit, with a sliding scale subsidy extending to those with incomes between 135% and 150% of poverty.

Prescription drug plan sponsors would be required to be licensed "as a risk-bearing entity eligible to offer health insurance or health benefits coverage in each state in which it offers a prescription drug plan" (² (Also see "PBM Industry Divided On Accepting Risk Under Medicare Rx Benefit Plan" - Pink Sheet, 19 Jun, 2000.)). The plan sponsor "assumes full financial risk...for qualified prescription drug coverage...that is not covered under reinsurance."

Thomas' plan provides reinsurance subsidies to "reduce premium levels...adverse selection among prescription drug plans...and to promote the participation of [prescription drug plan] sponsors." A new Medicare Benefits Administrator within HHS will oversee the program.

In 2003, the reinsurance payment amount would be the sum of: 30% of total drug costs between $1,250 and $1,350; 50% of costs from $1,350 to $1,550; 70% of drug costs between $1,450 and 1,550; 90% of costs ranging from $1,550 to $2,350; and 90% of costs exceeding $7,050.

The reinsurance package is designed to equal 35% of "total payments made by qualifying plans for standard coverage during the year." The MBA would be charged with adjusting the formula to ensure that payments remain at the 35% level.