Medicare drug plans are increasingly excluding coverage of new specialty drugs that treat complex conditions like cancers and autoimmune diseases. New research from the USC Schaeffer Center shows how these barriers may come at a cost to patients' health.
In a large study of Medicare beneficiaries with multiple sclerosis (MS), researchers found those in plans with broader coverage of MS treatments had significantly lower risk of developing new or worsening symptoms months later. The findings, published Aug. 1 in JAMA Network Open, suggest that plans with narrower coverage of MS treatments may be linked to worse health outcomes.
Pharmacy benefit managers, who negotiate drug benefits on behalf of plans, often leverage the threat of excluding a new medication from their list of covered drugs, or formulary, to extract deeper manufacturer rebates or discounts. While this can be an effective strategy to contain costs when cheaper generics or similar options are available to patients, it can be problematic for complex conditions since treatments often work differently in each patient.
"Patients with MS may need to try multiple drugs to find what works best for them. Broad formulary exclusions ultimately undermine the individualized care these patients need," said lead author Geoffrey Joyce , director of health policy at the Schaeffer Center and chair of the Department of Pharmaceutical and Health Economics at the USC Mann School of Pharmacy and Pharmaceutical Sciences.
Widespread formulary exclusions
Numerous medicines have been approved in recent years to help patients manage symptoms of MS, a potentially debilitating disease that attacks the central nervous system. While there is no cure, a growing number of treatments can help slow disease progression, reduce relapses and limit new disease activity.
As of 2022, there were 15 oral and injectable MS drugs across seven types of "classes," or groups of medication that work in similar ways. These treatments are all pricey, usually costing $5,000 to $10,000 per prescription, though some range much higher. Since they are not included in Medicare's "protected classes" of drugs, private insurers that administer Part D plans have greater leeway to refuse coverage or impose restrictions on their use.
The researchers examined drug coverage for 85,000 Medicare beneficiaries with relapse-remitting MS—the most common form of the disease, marked by periodic flare-ups of neurological symptoms. The beneficiaries either received Part D coverage through a stand-alone plan or as part of a more comprehensive Medicare Advantage plan in the previous year. Researchers found:
- Stand-alone plans most commonly included just four of the 15 available drugs (across four classes) on their formulary. Medicare Advantage coverage was broader, typically covering eight drugs across five classes.
- Just a few drugs were covered by nearly all Medicare plans, while many others were excluded by almost all stand-alone plans and most Medicare Advantage drug plans. That includes older drugs like teriflunomide, which was approved in 2012.
- For those in Medicare Advantage drug plans, having broader formulary coverage was associated with 8-12% lower odds of MS relapse during the current quarter. For those in stand-alone plans with broader coverage, the odds were 6-9% lower.
Alternative financing options may help expand access
The researchers warned that formulary exclusions for specialty drugs could become more widespread under Part D's new out-of-pocket cap, which limits beneficiaries' annual drug spending to $2,000 per year while shifting more costs onto plans. Since only covered drugs count toward the cap, plans may be further incentivized to exclude high-cost treatments.
Creative financing strategies for such medications could encourage broader coverage, the researchers said. For instance, arrangements that link payments to health outcomes or subscription-based models in which insurers pay a flat fee to manufacturers for unlimited access to a specific drug or set of drugs could help plans manage the long-term costs of specialty drugs.
"Innovative new treatments have made it possible to slow or prevent symptoms for some of the most complex diseases, but costs remain a challenge," Joyce said. "We must find sustainable ways to ensure all patients can access these potentially life-changing treatments."
