Specialty Drugs Force High Medicare Out-Of-Pocket Costs

Specialty prescription drugs are taking a big bite out of seniors' wallets, according to the Government Accountability Office.

A report issued by the GAO states that high-cost drugs--classified as drugs with a monthly cost of at least $500--in recent years have imposed far higher out-of-pocket costs for seniors on Medicare who used them than for those who didn't. The report focused on a class of drugs known as "specialty-tier," which tend to be the most expensive drugs on the market.

The drugs are designated by private prescription-drug plans that participate in the Medicare Part D program. Because of a "doughnut hole" in Part D coverage, which forces seniors to pay the entire cost for prescription drugs within a certain cost range, the price of the specialty-tier drugs can weigh heavily on Part D enrollees.

The gap in coverage under which enrollees have to pay the full price of drugs takes effect between the cost range of $2,700 and $6,154 per year. Above $6,154 in drug costs, Medicare pays the majority of the cost of purchasing drugs, which is considered catastrophic coverage.

According to the GAO, seniors using specialty-tier drugs reached the catastrophic-coverage threshold 55% of the time, while those who did not reached the threshold only 8% of the time. According to report, some drug plans said that the high costs came in part because Centers for Medicare and Medicaid Services limited their ability to exclude drugs from their plans in favor of less-expensive competing drugs.

Examples of specialty-tier drugs cited by GAO included Enbrel, which is manufactured by Pfizer Inc. (PFE) for the treatment of rheumatoid arthritis, and Gleevec, which is manufactured by Novartis AG (NVS) for treatment of leukemia.

Rep. Pete Stark (D., Calif.), who heads the House Ways and Means Health Subcommittee, said in a statement that "the best way to reduce out-of-pocket drug costs is to provide coverage through the doughnut hole, so that seniors aren't ever paying 100 percent of their drug costs." Democrats have pushed to close the doughnut hole as part of health-care overhaul legislation.

The Pharmaceutical Care Management Association, a trade group that represents pharmacy benefit managers, said the report shows a need to allow more generic versions of biologic drugs to come on to the market. The group's members include companies such as Medco Health Solutions Inc. (MHS) and CVS Caremark Corp (CVS).

"Generic competition lowers costs because it gives patients the power to choose and gives manufacturers an incentive to reduce prices," the group said in a statement.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; [e-mail]