From the U.S. Government Accountability Office, www.gao.gov

Transcript for: Addressing the Medicare Part D Prescription Drug
Coverage Gap

Audio interview by GAO staff with John Dicken, Director, Health Care

Related GAO Work: GAO-12-914: Medicare Part D Coverage Gap: Discount
Program Effects and Brand-Name Drug Price Trends

Released: October 2012

>> Narrator: [Background music] Welcome to GAO's Watchdog Report, your
source for news and information from the US Government Accountability
Office.  It's October 2012.  The Medicare Part D coverage gap occurs in
the time between coverage periods when 100 percent of drug costs fall to
beneficiaries.  The discount program aims to help beneficiaries with
their prescription drug costs during this period.  A group led by John
Dicken, a Director in GAO's Health Care team, recently reviewed the
oversight of this program and its impacts on brand-name drug prices. 
GAO's Jeremy Cluchey sat down with John to learn more.

>> Jeremy Cluchey: What is the coverage gap in Medicare Part D and how
does the discount program aim to address it?

>> John Dicken: Since the Medicare Prescription Drug Program started in
2006, there has been this coverage gap where what's maybe more
informally known as the donut hole.  And basically, that means that
individuals who are getting prescription drug coverage will have
coverage for the first amount of money that they spend in 2011 up to
about $2800 of drug costs.  And then after that they have to pay the
full cost of their drugs until they reach a higher limit, over $6,000,
in which case the coverage picks up again under the plan.  So the 2010
health care reform law known as the Patient Protection and Affordable
Care Act included provisions that would try to reduce that coverage gap. 
And the first and biggest step was to have manufacturers pay 50-percent
discount, so that when individuals go to get drugs that would have
already been in that coverage gap, the manufacturer is paying half the
cost and the individual only has to pay the other half.

>> Jeremy Cluchey: And your team in this report looked at how the
Centers for Medicare and Medicaid oversees the discount program. What
did you find there?

>> John Dicken: Right.  Really the role for the Centers for Medicare and
Medicaid Services is to ensure that those discounts are applied
accurately.  And so that when the individual does go to a pharmacy,
ensures they have a number of checks of what the claims are so that they
make sure that the individuals plan, Part D plan, actually applied the
discount when they actually purchase a brand-name drug and when they
really are in the coverage gap. And then they make sure that
retrospectively the manufacturer's reimbursing those Part D plans for
their share of the 50-percent discount.  So CMS goes through a number of
checks of those claims to make sure that all those steps have been
followed.

>> Jeremy Cluchey: You also spoke with drug manufacturers and other
stakeholders about their views of the effects of the program.  Can you
talk about what you learned in those conversations?

>> John Dicken: Right.  The difference, they call, those drug
manufacturers as well as the sponsors of the Part D plans, had somewhat
different perspectives on kind of what some of the effects of the
coverage gap--of the discount program--could be.  By and large, the
manufacturers felt that it was not resulting in any changes in prices or
rebates or the use of drugs, but some of the Part D plan sponsors felt
that it was contributing to the overall increase in drug prices. That if
manufacturers are giving a big discount on drugs, that they may have an
incentive to increase prices. And so some of the Part D plan sponsors
and their associated pharmacy benefit managers were concerned that that
might be happening.

>> Jeremy Cluchey: And on that question, you looked at the actual trends
in prices for brand-name drugs before and after the program began. What
did you find?

>> John Dicken: Really we were trying to isolate whether the discount
program could have resulted in an increase in costs.  And so we looked
at drugs that were resulting in a lot of the expenditures for people who
were in the coverage gap, and then compared that as a benchmark to drugs
that were used by people who never reached that coverage gap, and found
that really both before and after the implementation of the program in
2011, the trends for those prices were very similar. So that did not
provide any evidence that there were higher increases in cost for those
drugs that are used in the coverage gap than those that are used before
people reached the coverage gap.

>> Jeremy Cluchey: Finally, for taxpayers interested in the
affordability of prescription drugs, what's the bottom line here?

>> John Dicken: Well overall, I think it's really good news for
taxpayers and for Medicare beneficiaries.  This is a program that
doesn't cost taxpayers directly because manufacturers are paying the
discount.  It's not a government discount that's being paid. 
Beneficiaries are paying less for their drugs when they're in the
coverage gap. And CMS has a report that in 2011, 3.7 million
beneficiaries had reached that coverage gap and were benefiting from the
discount program, with an average benefit of about $613 per beneficiary.
So our findings that did not seem to be resulting in higher drug cost is
good news for both taxpayers and for beneficiaries. But there's still is
the overall concern about rising drug costs, as we saw the costs
continued to increase 9- or 13- percent per year.

[Background Music]

>> Narrator: To learn more visit gao.gov, and be sure to tune in to the
next episode of GAO's Watchdog Report for more from the congressional
watchdog, the US Government Accountability Office.

[Music]