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Inflation Reduction Act Includes Fix for Issues with Medicare Part D Design First Proposed by Penn Team

Drs Venkataramani and Delgado

President Joe Biden recently signed the Inflation Reduction Act into law, and while much has been discussed about the various provisions of this Act, one of its underappreciated parts is the section on the changes to the Medicare Part D prescription drug benefit design, according to Professor of Medicine and CHIBE Associate Director Jalpa Doshi, PhD.

This section fixes issues with the Medicare Part D design that were highlighted by a team at the University of Pennsylvania led by Dr. Doshi. This team worked on a series of papers that demonstrated that patient out-of-pocket costs (that were “too much and too soon” in the calendar year) under Part D are associated with markedly higher rates of abandonment of new specialty drug prescriptionsreductions and delays in treatment initiation following a new diagnosis or disease progressiontreatment interruptions; and earlier discontinuation of specialty drug treatments.

This section of the Act includes two key provisions that were first proposed by Dr. Doshi’s team in two papers that won back-to-back awards in a 2016 and 2017 national challenge call for papers on strategies to improve access to critical medications organized by Patient Access Network (PAN) Foundation and the American Journal of Managed Care. In addition to research publications, the team disseminated these two ideas to fix the Part D cost sharing design via more digestible communication for policy audiences, such as a Health Affairs blog, interviews on panels such as The Hill’s health care event, policy poster, and an infographic in collaboration with the PAN Foundation that was shared with Congressional staffers and in written testimony.

Specifically, the two provisions based on the ideas first recommended by her team that have become part of the law with President Biden’s signature are the following:

  • People with Medicare Part D drug plans will for the first time have an annual out-of-pocket maximum and not pay more than $2,000 per year for medications, effective 2025.
  • Part D plans will offer enrollees the opportunity to spread out and pay their out-of-pocket costs for prescription medications in monthly installments (“smoothing”), including a monthly limit, effective 2025.

“I started this journey over 20 years ago wherein I had worked on research led by my PhD advisor (Bruce Stuart, PhD) that supported the need for the creation of the Medicare Part D prescription drug benefit under the Medicare Modernization Act of 2003,” Dr. Doshi said. “It is amazing to see that my team’s research highlighting the issues with the Part D benefit design and specifically our targeted recommendations for implementing an annual out-of-pocket cost cap and ‘smoothing’ of the costs during the calendar year have now been incorporated to fix this major flaw in the Part D benefit.”

Dr. Doshi thanked her team members (in particular, Pengxiang Li, PhD, Amy Pettit, PhD, and Vrushabh Ladage, MHCI), as well as the PAN Foundation for supporting this work and being a major advocate for these changes. She also thanked the Leonard Davis Institute of Health Economics, the Center for Health Incentives & Behavioral Economics, and Penn Communications who helped disseminate this work.

“It is so gratifying to know that my team’s research and policy recommendations are definitely going to help approximately 3.5 million beneficiaries and millions of more in the future with novel expensive drug treatments rapidly entering the market in nearly all disease areas,” Dr. Doshi said. “Congratulations to all the Medicare beneficiaries of today and tomorrow who are going to benefit from these changes!”

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