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Get ready for a long read. Last week, the Obama Administration announced a five-year program to test alternative payment models for Medicare Part B drugs. The program will try new methods relating to drug prices, patient outcomes and physician payments starting next year.

Currently, Medicare pays doctors an extra 6% of the price of the drug they administer, which gives providers a bigger payment when they choose medications that cost more. This can lead to prescribing more expensive drugs, which sometimes differ from cheaper drugs only in price.

What is a Part B Drug?
Not all prescriptions are filed under Part D. Drugs that beneficiaries don’t take on their own, like those that are administered by injection or infusion at a doctor’s office, fall under Part B.


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What will the program do?
There will be two phases. The first phase, which would go into effect later this year, would decrease Medicare’s additional payment from 6% to 2.5%, and use a flat payment of $16.80 per drug per day. The Centers for Medicare and Medicaid Innovation are looking to see how these changes affect the way doctors prescribe medications.

The next phase, which could begin as soon as early next year, will include a series of value-based purchasing options, based on price and effectiveness of drugs. Each strategy will be tested in a different geographic area:

  • Decreasing or ending cost-sharing for Part B drugs, so that beneficiaries may access effective drugs more easily
  • Creating tools for providers to choose drugs with evidence of their effectiveness and other information
  • Options for different payments based on the effectiveness of a drug
  • Using a benchmark, or standard rate or payment, for similar drugs
  • Connecting patient outcomes with drug prices by partnering with drug companies

What are people saying?
The Obama Administration, Centers for Medicare and Medicaid Services and advocates say that the decision for which drug to prescribe should be made with factors such as effectiveness, quality, the patient’s need, and price.

Those against the payment models call it an “absurd experiment,” and believe that doctors know what’s best for the patient, and should be free to prescribe without government oversight. Some doctors in certain specialties are concerned about losing major percentages of their profits.

Comments can be submitted on the program until May 9th.

Will any group be negatively affected?
Some specialists will be more impacted than others by the program. Oncologists, Ophthalmologists, and Rheumatologists, who make a significant profit with Medicare’s drug payments, would see the biggest change in money earned. Primary Care and Family Practice Physicians would see a 44% rise in Part B drug payments, as they typically prescribe and administer cheaper drugs than other specialists.

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To read more about the Part B payment program, see this NPR article.

The full proposition of the program is available online at the Federal Register.

About 20 new generic drugs will be on the market at the end of this year. The patents on the brand drugs have expired, allowing drug manufacturers to create generic versions. Most aren’t on the Medicare Plan Finder yet, and won’t be released until later in 2016.

Sometimes, companies will try to expand their patent, allowing for more time before a generic can be produced. Revenues for brand drugs drop dramatically when their generic versions are introduced. Generic drugs can take over 90% of a brand drug’s sales.

Here a few popular drugs that will soon have a generic version:

  • Crestor – Rosuvastatin Calcium
    Treats high cholesterol. Available in May.
  • Benicar – Olmesartan Medoxomil
    Treats high blood pressure. Available in October.
  • Zetia – Ezetimibe
    Treats high cholesterol. Available in December.
  • Proair HFA – Albuterol Sulfate
    Treats asthma, COPD and others. Available in December.
  • 1This image is from Click on the image or link to see it enlarged

Fast Facts

  • The price of generics is usually 80-85% less than brands.
  • Once introduced, generics take about 90% of a brand’s sales.
  • Generics must match the brand’s active ingredient, strength, type of medicine, effects, performance, and standards of testing.
  • Generics can differ from brands in color and shape, label and packaging, and flavors and preservatives.
  • There are two types of generics: Generic Equivalents, with the same active ingredients, and Generic Alternatives, with different active ingredients. Generic Alternatives are not prescribed as often, and require a separate prescription to be filled.


Have you gotten a vaccine recently? A new report shows that most Medicare plans don’t cover them.

Precription Drug Plans
No Prescription Drug Plans use a Vaccine Tier that would cover vaccinations, so most beneficiaries pay cost-sharing fees for vaccines.

  • Average copay: $35 – $70
  • Average coinsurance: 28% – 39%
  • Actual out-of-pocket: $14 – $103

Medicare Advantage-Prescription Drug plans
A small amount of MAPD plans use a Vaccine Tier. in 2015, about 3% of MAPD plans had a Vaccine Tier. In 2012, it was about 2%. Among these plans, the Shingles shot, Zostavax, was the most often covered.

  • Average copay: $42 – $54
  • Average coinsurance: 16% – 27%
  • Actual out-of-pocket: $10 – $72

Actual out-of-pocket prices were based on current costs for vaccines. If  a beneficiary hasn’t reached they would pay the full cost of the vaccine, which can range from $38 – $276.

Why are the payments for beneficiaries have such a wide range? 
The range of prices shows the rage of tiers that Prescription Drug and MAPD plans use for vaccines.


These are the vaccines listed above: 

Boostrix: Booster shot- Tetanus, Diptheria, Whooping cough
Zostavax: Shingles
Varivax: Chicken Pox
Menomune: Meningitis
Havrix: Hepatitis A
VAQTA: Hepatitis A
Energix-B: Hepatitis B
Twinrix: Hepatitis A & B
Tenivac: Booster shot- Tetanus, Diptheria



Tom Says:

“This is something we should all be telling our Congressmen: that all Medicare plans should have Vaccine Tiers to cover vaccinations.”

See the report by Avalere Health here.

For more, read a blog about the report on Modern Healthcare.

Difference can be hundreds of dollars

The formularies of Prescription Drug Plans show if, and how, the plan covers medications. A report by the Kaiser Family Foundation shows how the costs of on-formulary drugs differ between plans.

Of those listed, most generics’ highest cost will be $10, with the median cost hovering around $3-$5 dollars. Atorvastatin spans $0 to $20. Hydrocodone can cost up to $78- double the median cost of $36. Half of these drugs treat hypertension and high cholesterol.


This image is from the Kaiser Family Foundation.

The fluctuation in pricing is more severe with brand drugs. This list includes drugs that treat diabetes, asthma and other conditions. The highest cost of 60% of the top 10 brands is over $100. In the case of Spiriva, the highest cost is over ten times the lowest cost.

How is there such a difference?
The most important questions when looking at drug costs are:
  • Which tier is the drug in? 
  • What’s the cost to the customer per tier? 
  • Is the cost in copays (a flat cost for all drugs in a tier) or coinsurance (a percentage of the drug cost)?
These can make a big difference in the cost to the beneficiary.
This image is from the Kaiser Family Foundation.
What if it’s not on the formulary?
Then costs are even higher. If your drugs aren’t covered, there are alternatives: using websites that compare drug prices and looking into Canadian pharmacies.
This image is from the Kaiser Family Foundation.
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New tool shows the drugs with the highest costs for Parts B and D

Medicare has created an online dashboard to show which drugs have the highest spending among Part B and Part D plans.

In the interest of transparency, CMS aims to make public the trends surrounding drug spending by Medicare and Medicare beneficiaries. They hope to start a discussion about the costs of drugs and how they could be changed.

If a drug ranks high for spending, cost increase or cost to users, it was considered for the dashboard. Overall, the dashboard represents a large portion of total spending by Medicare. The Part D drugs show 33% of overall spending. The Part B drugs show 71%.

Below are three Part D charts and information on the drugs included. See Part B charts on the online dashboard (link below).

Trends in Medicare Part D Total Spendingfor the Top 5 Drugs in 2014.


  • Abilify: treats schizophrenia, bipolar disorder, and others.
    • Generic: Aripiprazole.
  • Advair Diskus: treats asthma and COPD.
    • Generic: None
  • Crestor: treats high cholesterol and high levels of triglycerides.
    • Generic: There is no generic version of Crestor, or Rosuvastatin Calcium. There are generic statin drugs, which are generic forms of other brand drugs, but no generic version of Rosuvastatin.
  • Nexium: treats GERD.
    • Generic: Esomeprazole Magnesium
  • Sovaldi: treats hepatitis C.
    • Generic: None





Annual Spending per User by Total Spending for Medicare Part D Drugs: 2014. 


  • Tracleer: treats pulmonary artery hypertension.
    • Generic: None
  • Gleevec: treats leukemia and other types of cancer.
    • Generic: Sales of the generic imatinib mesylate will begin in February. The drug was approved in December.
  • Olysio: treats hepatitis C.
    • Generic: None
  • Sovaldi: treats hepatitis C.
    • Generic: None
  • Copaxone: treats multiple sclerosis.
    • Generic: Glatopa
  • Humira: treats arthritis, Crohn’s disease, and others.
    • Generic: Adalimumab





Medicare Part D Drugs with Large Increases in Cost per Unit, 2013 to 2014.


  • Vimovo: PPI/ NSAID; treats arthritis, pain and other conditions.
    • Generic: Esomeprazole/ Naproxen
  • Captopril: ACE inhibitor; treats high blood pressure and kidney problems.
    • Generic: Already generic
  • Digoxin/ Digox: treats heart failure and heart rhythm disorders.
    • Generic: Digoxin; (Digox is a brand drug)
  • Prednisolone Acetate: treats eye conditions.
    • Generic: Already generic
  • Clobetasol Propionate: treats skin conditions.
    • Generic: Already generic

To see the online dashboard, click here.

To learn more about the online dashboard, see this article from the Washington Post.



Express Scripts will offer a $1 alternative to the $750 dollar pill. 

In September, we wrote about Daraprim, which originally cost $13.50 per pill, and skyrocketed to $750 overnight. Last week, Express Scripts announced that they would offer a cheaper alternative. Express Scripts is the largest pharmacy benefits manager in the country.

What is the new drug?

The company partnered with Imprimis Pharmaceuticals to create a slightly different pill- not a generic version, which would require approval by the FDA. Theirs has pyrimethamine, the main drug in Daraprim, and leucovorin, which is commonly prescribed with Daraprim to control its’ side effects. It will cost $99 for a bottle of 100 pills- less than $1 each.

What is the old drug?

Daraprim is a decades-old drug that is used to treat toxoplasmosis, a rare infection that typically affects those with decreased immune systems. Since the disease is so uncommon, there was never a push for a generic version of the medication that treats it. The drug Express Scripts offers is cheaper than Daraprim’s price, even before Turing Pharmaceuticals raised it from $13.50 to $750. After public outrage at the price hike, the CEO of Turing Pharmaceuticals, Martin Shrkeli, said that hospitals would be offered discounts of up to 50%.


Express Scripts was motivated to help patients and the doctors treating them. After hearing from many infectious disease doctors, the Chief Medical Officer at Express Scripts, Dr. Steve Miller, began looking for a solution.

Now, “the use of this compounded medication could theoretically reduce a hospital’s cost of treating a patient with Daraprim from as much as $40,000 to less than $60,” Ron Shinkman wrote on Fierce Health Finance.

See more about Express Scripts, Imprimis and their drug on

Will Express Scripts’ decision impact healthcare and pharmaceutical prices? Read more here.

Most plans will see a small increase 

The new 2016 Prescription Drug Plans will cost more than they did this year.

There are a few signs of rising costs, from U.S. News and World Report:

Switching to a different plan will help beneficiaries save money, but The Kaiser Family Foundation says that overall, this could be the biggest increase since 2009.

In Virginia, the average monthly premium for 2016 Prescription Drug Plans will increase 19%, according to the Kaiser Family Foundation.


Prices vary for current and new beneficiaries

The White House announced the 2016 Medicare Part B premiums this week. They are significantly less than expected- you can see the original predictions in a previous newsletter. Here’s what you need to know:

Premiums: The Part B premium will increase for new beneficiaries and some current beneficiaries.

  • Current Beneficiaries: Most current beneficiaries will pay $104.90 per month, the same as this year.
  • New Beneficiaries: New beneficiaries will pay an increased premium of $121.80 per month.
  • High-income Beneficiaries: Beneficiaries making certain amounts will have a higher premium Those making over $85,000 a year will pay $170.50. The prices increase incrementally, up to a premium of $389.80 for those making over $214,000 per year.
Deductible: The Part B deductible will increase for all beneficiaries. It has been $147 since 2013.
  • Current Beneficiaries: Current beneficiaries will pay $166.
  • New Beneficiaries: New beneficiaries will pay $166.

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See this article by U.S. News & World Report for more details on the 2016 Part B premium prices.

Read The White House’s post about the 2016 Medicare Part B Premiums on their website.

Prices will still raise slightly

Last week, we wrote about the likelihood of Medicare Part B premiums increasing because the Cost-of-Living did not increase.

Because of action by Congress, Medicare Part B premiums will not increase by 50% as expected. By slightly raising the annual deductible for all beneficiaries, and using money from the Treasury to cover Medicare Part B, the price hike will be avoided.

What will I pay?

  • All Medicare beneficiaries will pay more for the annual deductible, which will increase from $147 to $167. The price originally predicted was $233.
  • For most beneficiaries, their monthly Medicare Part B premium is $104.90. 30% of beneficiaries will see an increase to $120. Before the budget agreement, the premium would have been $159. Your premium will increase if:
  • All beneficiaries will pay $3 more per month for their premium until 2021, to pay back the Treasury’s loan.
What else is in the agreement?
  • A new felony charge: Conspiracy to commit Social Security fraud, which carries a maximum fine of $250,000 and up to 5 years in prison.
  • A requirement that, if the prices of generic drugs rise faster than inflation, companies that produce them must provide Medicaid with bigger discounts.

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For more information about Congress’s agreement and what it means for seniors, see this article from the New York Times.

Click here to read more about the changes to Social Security in the budget agreement, from the LA Times.

This week, the price of a standard drug used for critical parasitic infections increased from $13.50 to $750 per pill.

The drug, Daraprim, has been a mainstay in treatment for over 60 years. After acquiring the drug in August, the start-up pharmaceutical company called Turing Pharmaceuticals increased the price by 5,000%.

The drug is used to treat toxoplasmosis, a common food-borne disease, that infects those with weakened immune systems. Typically, the drug is taken by babies whose mothers have infections during pregnancy and patients with organ transplants, AIDS, and some types of cancer.

Last month another decades-old drug, Cycloserine, was purchased by Rodelis Therapeutics, who then increased the price from $500 to $10,800 for 30 pills. After the news broke about the Daraprim price hike, Rodelis returned the rights to the drug to the former holder, a non-profit, on Tuesday. Instead of the original $500 for 30 pills, the organization will double the price to $1,050.

This is becoming a more common practice on drugs that are standard in specific, lesser-known illnesses.

The cases of Daraprim and of the tuberculosis drug, Cycloserine, are examples of a relatively new business strategy – acquiring old, neglected drugs, often for rare diseases, and turning them into costly “specialty” drugs,” the New York Times wrote in an article.

The CEO of Turing Pharmaceuticals is Martin Shkreli, a former hedge fund executive who has been on multiple news channels and vocal on social media since Monday.

He said since he’s shown that companies and their investors can make a profit from rare diseases such as toxoplasmosis, the result will be more education about the illness and better drugs and service for patients.

Many have spoken against him and his company, including the HIV Medicine Association, the Infectious Diseases Society of America, and Democratic Presidential candidates Hillary Clinton and Bernie Sanders.

After the “outrage” at the beginning of the week, Tuesday night Shkreli said he would lower the price, but did not say by how much, or what the new price would be.


This image is from the Kaiser Family Foundation.

In a Kaiser Family Foundation poll, nearly three-fourths of Americans believe we pay more for drugs than people in other countries. In this case, they’re right- the generic version of Daraprim costs about $20 for 100 pills abroad. Drug costs in the United States exceed other countries by far, shown in this chart by the New York Times.


This image is from the New York Times.

Due to the Richmond 2015 UCI Road World Championships and the location of our office,  we will be closed Thursday and Friday. We will be back on Monday!

mc13Yogi Berra, the New York Yankees Hall of Famer, died yesterday at 90. Yogi was a great human being, and while he was known for his quotes, he had so many special things about him.

  • “When you come to a fork in the road, take it.”
  • “Baseball is 90% mental. The other half is physical.”
  • “It ain’t over ’till it’s over.”

This photo is from the National Italian American Sports Hall of Fame website.

To read more about price increase of Daraprim, click here.

Visit the Kaiser Family Foundation’s website for more on their survey on prescription drug prices.


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