PhRMA/Baucus Deal: Benefits Beyond Cost Savings for Seniors in the Medicare Part D Doughnut Hole

We’ve been working to run some numbers to calculate the impact of the PhRMA /Baucus deal announced over the weekend, which aims to cut in half the cost of brand-name drugs for seniors in the Medicare Part D “doughnut hole” coverage gap.  A preliminary analysis suggests that the average senior entering the gap will save about a thousand dollars a year.  The analysis does not consider any means testing that might be applied.  There are obvious benefits for seniors in terms of immediate cost, but it may also end up being an excellent trade-off for branded drug manufacturers: the self-rationing that seniors engage in during the doughnut hole is much more heavily weighted to branded drugs, and once a drug therapy is interrupted, a significant majority of patients do not resume that therapy while another segment switches to generic alternative therapies.  The discount applied via the PhRMA/Baucus plan will keep those seniors on their regimens and reduce the self-rationing and substitution behavior that could hurt the manufacturers long-term.  This will become even more important as large numbers of baby boomers on branded medicines transition to Medicare Part D plans in the next few years.  We’ll be posting more details soon. 

 ~ Jim Yocum, DestinationRx