calls from industry stakeholders (such as AARP) and politicians to add an independent drug benefit to the Medi- care program.

In his 1999 State of the Union Address, President

Clinton called

affordable prescription drugs the “greatest growing need of seniors,” and in June 1999, he released a pro- posal detailing a new, voluntary Medi- care Part D that would give Medicare beneficiaries prescription drug cover- age up to $2,000 per year for a $24 per month premium. Although the pro- posal would ultimately go nowhere, it cleared the way for expanded dis- cussion of Medicare prescription drug coverage in the 2000 election and into the first years of the George W. Bush administration.

After decades of debate and discus- sion, the statutory origins of today’s Medicare Part D came in the form of the landmark Medicare Prescription Drug, Improvement, and Moderniza- tion Act (MMA) of 2003. The legis- lation was the result of the almost a full year of tense negotiations that pit- ted several competing proposals from both the House and Senate. The core of the major reforms had its roots in President Clinton’s 1999 proposal: the creation of a new, voluntary Medicare Part D prescription drug benefit that would take effect in January 2006. The Part D benefit would carry a $35 per month premium and be administered through standalone prescription drug plans (PDPs) or new Part C compre- hensive plans (Medicare Advantage). For beneficiaries enrolling in Part D, Medicare would pay large portions of drug expenses up to $2,250 and above $5,100 per year, a structure that would infamously come to be known as the “doughnut hole.” Initially, both Medicare beneficia- ries and industry stakeholders viewed the new Part D coverage with skepti- cism. In 2006, only 17 million (53 per- cent) of the program’s beneficiaries enrolled in Part D. Since then, how-

Although ASCs might administer and prescribe fewer drugs than other sites of services, the industry still needs to pay careful attention to changing regulations.”

—Alex Taira, ASCA

ever, Part D has become an integral part of the program currently deliver- ing benefits to some 43 million ben- eficiaries (72 percent), according to a May 17, 2018, KFF report.

The Current Administration Though most view the Part D expan- sion as successful, particularly regard- ing increasing enrollee access to nec- essary medication, the overall increase in expenditures on drugs has become a major policy concern. According to a August 2016 report in The Journal of the American Medical Association, the US spends more per person on prescrip- tion medication than any other country with more than $340 billion spent on retail prescription drugs per year. In response to these concerns, the

Trump administration released its American Patients First blueprint in May 2018. This broad plan seeks to lower drug prices and reduce out-of- pocket costs for patients. The blue- print describes certain actions that the administration has taken to address four key strategies for reform: improved competition, better negotiation, incen- tives for lower list prices and lowering out-of-pocket costs. In October 2018, the administration released its most drastic proposal yet, a new International Pricing Index (IPI) model that would reform how Medicare pays for physi- cian administered drugs under Part B. These drugs are currently reimbursed

at amounts based on average sales price, but the IPI proposal would shift the reimbursement basis to prices paid in other countries. Phased in over five years, the IPI model would create a new level of vendors who would assume responsibility for negotiating prices with manufactures and then purchas- ing and distributing drugs to providers. Despite the administration’s efforts,

a number of drug manufacturers pro- ceeded with planned increases in drug prices effective January 1, 2019. Per- haps in response, the Department of Health and Human Services (HHS) has been extremely active in the first half of 2019 in the realm of prescrip- tion drug reform. In January, CMS announced a new Part D Payment Modernization Model that would give Medicare PDPs the chance at perfor- mance-based payments in return for taking on some patient risk. Later that same month, a new HHS proposed rule gave manufacturers the ability to offer discounts directly to consumers. And finally in May, CMS released a final rule that requires manufacturers to disclose drug prices in direct-to-con- sumer TV advertisements. Most of these proposals have sig- nificant opposition from some sec- tor of the healthcare industry and are unlikely to see full implementation. Although the rising costs of prescrip- tion drugs and corresponding rise in overall expenditures remains a press- ing concern for both parties, strategies to combat this rise are disparate. Some solutions, such as the IPI model, seek to strengthen negotiating power with manufacturers, while others look at reducing Part D expenditures. How- ever, given the 2020 election cycle, it is likely that we will see yet more pro- posals in the coming months both from candidates and an administration that has made this issue a priority.

Alex Taira is ASCA’s policy analyst. Write him at


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