Document: Restructuring the CMS Federal Reinsurance Program to Include Manufacturer Liability

As prescription drug prices continue to rise, many stakeholders have debated how to slow the trend and who should pay for it. The Medicare Advantage and Part D programs remain at the center of this discussion. Organizations such as the Medicare Payment Advisory Commission (“MedPAC”) and the American Action Form (“AAF”) as well as Congress have put forth proposals to redistribute the liabilities within the Part D program in response.

Under current Part D program rules, the CMS covers 80% of prescription drug costs (less an adjustment for rebates and other forms of Direct and Indirect Renumeration (“DIR”)) above a certain threshold, known as the True Out of Pocket cost (“TrOOP”). Claims above the TrOOP are commonly referred to as catastrophic claims. In the catastrophic phase of the Part D benefit, the member is liable for 5% of costs and the health plan covers the remaining 15% (plus an adjustment for DIR). Prescription drug manufacturers (“manufacturers”) currently share a portion of the liability in the “Gap” phase for brand drugs but have no liability in the catastrophic phase.

Uploaded: 06-24-2019

Sign-up for updates

  • This field is for validation purposes and should be left unchanged.