Medicare Part D Formularies:

CMS Conducts Oversight of Mid-Year Changes; Most Mid-Year Changes Were Enhancements

GAO-11-366R: Published: Jun 30, 2011. Publicly Released: Aug 1, 2011.

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The Medicare voluntary outpatient prescription drug insurance program, known as Medicare Part D, provided prescription drug coverage for about 23 million beneficiaries--eligible individuals 65 years and older and eligible individuals with disabilities--enrolled in the program in 2010. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private companies, known as sponsors, that contract with the Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS), the agency that administers the Medicare program. Sponsors may have multiple contracts with CMS to provide drug coverage, with each contract offering one or more distinct Part D plans. Sponsors compete for beneficiary enrollment on the basis of plan premiums and benefit designs. Sponsors also vary in the content of their formularies--the list of covered drugs and associated utilization management (UM) requirements. UM requirements include (1) step therapy, which requires that a beneficiary try lower-cost drugs before a sponsor will cover a more costly drug; (2) prior authorization, which requires a beneficiary to obtain the sponsor's approval before a drug is covered for that individual; and (3) quantity limits, which restrict the dosage or number of units of a drug provided within a certain period of time. Sponsors may design their plans to use the same or different formularies. Sponsors may use their formulary structures to manage beneficiaries' drug spending and utilization, however, sponsors must adhere to a minimum set of formulary requirements established in statute and regulation. In its administration of Part D, CMS is responsible for implementing program requirements and overseeing sponsors' compliance with these requirements. To do so, CMS issued regulations and program guidance addressing classes of drugs that must be covered on sponsors' plan formularies, classes of drugs that may not be covered by Part D, UM program requirements, and annual formulary submission time lines. Medicare beneficiaries may choose to enroll in plans based, in part, on the formularies that sponsors establish for their plans at the beginning of each year. With few exceptions, once beneficiaries enroll in a sponsor's plan, they may not change plans until the next year. However, sponsors may make certain changes to their plans' formularies during the year, known as mid-year formulary changes, provided that their plans' formularies continue to meet certain minimum Part D formulary requirements including those that apply to mid-year changes. Mid-year formulary changes may enhance Part D formularies by adding drugs or removing or loosening UM requirements for drugs, or may restrict formularies by removing drugs or tightening UM requirements for drugs. Mid-year changes affect sponsors' plan formularies and may disrupt beneficiaries' access to certain prescription drugs or make them responsible for new or unexpected costs. Congress asked us to review mid-year formulary changes in the context of CMS's oversight and the potential effect of mid-year changes on beneficiaries. In this report, we describe (1) the actions CMS has taken to oversee sponsors' compliance with mid-year formulary change requirements; and (2) the mid-year formulary changes sponsors made for their plans in 2008 and 2009 and how many beneficiaries filled a prescription for a drug later affected by a negative mid-year formulary change in 2008.

CMS monitors--directly examines--certain requests for mid-year formulary changes prior to their implementation to ensure that formularies meet requirements including mid-year change requirements. CMS also conducts retrospective oversight activities of sponsors' compliance with mid-year formulary change requirements. Specifically, CMS monitors agency data; conducts discussions with trade groups, advocates, and other patient representatives; and conducts targeted audit activities. Our analysis of mid-year formulary changes in 2008 and 2009 indicated that sponsors implemented multiple mid-year changes for almost all plans in those years. Formulary enhancements, which added a drug to the formulary or removed or loosened restrictions on a drug, accounted for 87.4 percent of changes in 2008 and 88.6 percent in 2009. Negative changes, such as removing a drug from a formulary, accounted for 12.6 percent of changes in 2008 and 11.4 percent in 2009. In addition, we found that in 2008 about 5 percent of beneficiaries (over 1.1 million beneficiaries) filled a prescription for a drug that was later affected by a negative mid-year change.

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