The CMS' Center for Medicare & Medicaid Innovation on Tuesday announced that it would test a new model to reduce Medicare enrollees' out-of-pocket costs for insulin.
The Part D Senior Savings Model will cap beneficiaries' copays at $35 for a 30-day supply of insulin for the entire benefit year. Participating insurers will offer seniors prescription drug plans with supplemental insulin coverage.
The pilot begins on January 1, 2021. Plans have until May 1 to apply.
"Beneficiaries who take insulin and enroll in a plan participating in the model should save an average of $446 in annual out-of-pocket costs for insulin, or over 66%, relative to their average cost-sharing for insulin today," the CMS said in a statement.
The agency will also test how plans can use Part D rewards and incentives programs to further healthy behaviors and medication adherence.
About a third of Medicare beneficiaries live with diabetes, and more than 3.3 million of them use at least one common form of insulin. But high insulin costs can lead them to ration their medication and jeopardize their health, leading to life-threatening complications such as kidney failure or heart attacks.
The CMS estimates that the federal government will save more than $250 million during a five-year period thanks, in large part, to pharmaceutical companies paying more discounts. Within the coverage gap, drugmakers will pay a 70% discount for insulin, but the payments will be calculated before supplemental benefits are applied.
That would shift costs from plans to drugmakers since, right now, when plans offer supplemental benefits in the coverage gap, the manufacturer discount is calculated off a lower amount, said Juliette Cubanski, associate director of the program on Medicare policy at the Kaiser Family Foundation.
The agency hopes to incentivize insurers to participate by offering them additional risk corridor protection for 2021 and 2022 if they enroll more insulin-dependent diabetics than they expect.
Eli Lilly, Sanofi and Novo Nordisk, the three insulin producers in the U.S. market, said that they would participate in the demonstration.
"We will be working with CMS in the coming weeks to enroll in the demonstration and we believe their plan, based on shared contributions from both manufacturers and Part D plans to directly lower out-of-pocket costs for Medicare beneficiaries, is the right approach," said Ashleigh Koss, head of media relations for Sanofi, in an email.
But the model won't do anything to address high insulin prices, which have risen dramatically in recent years.
"That's a real problem for people who don't have health insurance and for people in high-deductible plans," Cubanski said. "What they pay is basically the list price of the drug until they meet their deductible."
It also won't help people who are enrolled in Part D plans, but whose plan sponsor decides not to participate in the model, including nearly half of Part D beneficiaries—about 25 million people—enrolled in basic plans.
"One point I would drive home is that this is a voluntary demonstration project, so the number of people who will benefit depends entirely on the number of plans who chose to participate," Cubanski said.
The plan is likely a win for Medicare beneficiaries and plan sponsors, and workable for pharmacy benefit managers and drugmakers who have been under pressure from Congress and the White House to do something to lower insulin costs.
America's Health Insurance Plans, an insurer trade group, did not respond to a request for comment before deadline.
Correction: An earlier version of this story incorrectly described how costs would shift from plans to drugmakers.