Overview of the 2025 Medicare Part D Program Redesign: A Paradigm Shift for Pharma Manufacturers

The Medicare Modernization Act of 2003 included the Coverage Gap or Donut Hole, as it’s commonly referred to, as a part of the redesign of the Part D drug benefit. This reduced the total cost that Medicare incurred by shifting costs to patients during the Coverage Gap or “Donut Hole”. Following the implementation of the Medicare Modernization Act of 2003, additional legislation was passed which introduced changes to reduce the financial burden on patients during the Coverage Gap and shifted most of the incurred costs to Manufacturers.

In response to the evolving healthcare landscape, and stemming from the Inflation Reduction Act (IRA) of 2022, the 2025 Medicare Part D program redesign, reshapes the Part D program and introduces new financial responsibilities for covered drug manufacturers within the Medicare Part D program.

Here’s a closer look at the three differentiators for drug manufacturers:

1. Elimination of Coverage Gap Discount Program:
   • Currently, covered drug manufacturers pay 70% of patients’ cost of drugs while the patient is in the coverage gap period.
   • In the redesigned program the Medicare Coverage Gap Discount Program will be phased out.
2. Introduction of a New Discount Program:
   • Covered drug manufacturers will be obligated to contribute financially during both the coverage and catastrophic periods.
   • Manufacturers will pay 10% of patient costs for all branded drugs prescribed to Part D patients during the coverage period.
   • The financial responsibility for manufacturers increases to 20% during the catastrophic period, marking a significant shift from the current reimbursement structure.
3. Expanded Rebate Obligations:
   • While the redesigned program introduces additional rebates, the actual dollar amount per claim will vary.
   • The overall financial impact of this will vary depending on the products being reimbursed but does have the potential to increase Medicare Part D rebates for drug manufacturers.

The redesigned program is scheduled to take effect in 2025, providing a transition period for covered drug manufacturers to adapt to the new reimbursement structure. CMS has announced a few deadlines for drug manufacturers leading up to the 2025 including the following:

• December 15, 2023: Non-binding, preliminary eligibility information (optional)
  • Specified manufacturers (including small manufacturers) meeting statutory criteria may be subject to a multi-year phase-in period during which they pay a lower percentage discount on certain applicable drugs dispensed to applicable beneficiaries. To correctly identify these manufacturers, CMS required certain information to determine eligibility by this due date.
  • If you missed this deadline, all manufacturers that sign a Discount Program agreement by the final deadline to participate in any year of the phase-in can be considered.
• March 1, 2024: Final ownership details due (mandatory)
  • This includes submitting current information regarding a drug manufacturer’s name, address and key contacts.
• March 1, 2024: Sign Medicare Part D Manufacturer Discount Program Agreement and TPA Agreement for a 2025 Effective Date (mandatory)
• Drug manufacturers must enter into a Discount Program agreement no later than this deadline for a 2025 effective date. Manufacturers entering an agreement March 2, 2024 through October 31, 2024, will not be eligible for a Discount Program agreement until January 1, 2026.

The Medicare Part D overhaul signifies a shift in how pharmaceutical manufacturers navigate their responsibilities within the program. Manufacturers must proactively engage with stakeholders to forecast how these changes will impact financials, review the impact on their product portfolio, and ultimately determine if adapting new contracting strategies or compliance practices are needed to thrive in this new Medicare Part D landscape.

For guidance and support in navigating this change, contact the experts at Prescription Analytics.

Sources:

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CMS, “Medicare Part D Manufacturer Discount Program Final Guidance,” November 17, 2023

Avalere, “Risk Adjustment Under Part D Benefit Redesign, February 27, 2023