Though 'Donut Hole' Is Shrinking, Medicare Drug Costs Are Rising: Study

Seniors' out-of-pocket costs for cancer drugs continue to rise steadily, with patients paying thousands of dollars each year despite efforts to close the Medicare Part D "donut hole," researchers said.

Prices for 13 anticancer drugs available through Medicare Part D in 2010 rose an average 8% over inflation every year over the past decade, said lead researcher Stacie Dusetzina. She is an associate professor of health policy and cancer research at Vanderbilt University School of Medicine in Nashville, Tenn.

Seniors on average now pay $10,470 a year out of pocket for those drugs, up from $8,794 in 2010, the researchers found.

"People are paying more for the same drugs today than they did before the donut hole closed," Dusetzina said. "You can see a steady march up in price every year for all of these products."

The problem is that "some of the older cancer drugs are the most effective out of the bunch," she said.

The number of anticancer drugs covered by Medicare's prescription plan increased from 13 in 2010 to 54 in 2018. As you would expect, the new drugs cost more.

"We're also seeing that the newer products are just starting out with higher price points," Dusetzina said. "Every new drug appears to be priced pretty aggressively."

But by tracking total and out-of-pocket costs, Dusetzina and her colleagues found that even the older drugs have been steadily increasing in price.

It had been hoped that drug prices for seniors would decrease after the Affordable Care Act began slowly closing the "donut hole," a quirk of Medicare Part D in which patients were exposed to a large percentage of their drug costs after they passed an initial coverage limit.

That's just not the case, Dusetzina said. People are paying almost $1,700 more per year for the same products.

In 2018, 48 of the 54 medications had monthly prices exceeding $10,000 per prescription fill, and 21 cost more than $15,000 per fill, the researchers found.

"Their out-of-pocket price for their first fill can be several thousand dollars, just for a 28-day or 30-day supply of pills," Dusetzina said. "That is an incredibly large amount of money to ask someone to pay for a fill of medication at a pharmacy counter."

Even when they're filling drugs for cancer treatment, she added, "a lot of people will leave their drugs behind if they're asked to pay over $2,000 per month."

The price increases for the older cancer drugs constitute "a pure exercise of market power," said Eliot Fishman, senior director of health policy for the health consumer advocacy group Families USA.

"There is no major increase in the cost of manufacture of those drugs," Fishman said. "These quite substantial cumulative increases are just a result of the power of these drug manufacturers to set price and increase price."

Under Medicare, anticancer drugs are a protected class of medications, Dusetzina and Fishman said. That protection is supposed to help ensure access to the drugs.

"In general, our feeling on this is that those protected classes are protected for a reason," Fishman said. "With cancer medications, there ought to be a lot of clinical flexibility for physicians to find the drug that is going to be most effective and to do so in a timely way."

Dusetzina said policymakers could help seniors by capping out-of-pocket spending for Medicare Part D prescriptions.

"Medicare beneficiaries don't have a limit on their out-of-pocket spending. Even when you hit the catastrophic spending level, you have to pay 5% of the drug's price out of pocket for every single fill," she pointed out.

The federal government also could give Medicare more power to negotiate or set prices for covered drugs, Fishman said.

As it stands, people should understand that the issue of high drug prices for seniors has not gone away, Dusetzina said.

"There's a sense that closing the donut hole fixed a lot of the problems with Part D," she said. "It's important to recognize that closing the donut hole did help a lot of people, but people who are filling these very expensive drugs don't really benefit enough from that policy change. They need more direct intervention."

Due to the donut hole, seniors in 2018 bore the brunt of their prescription prices after their total drug costs topped about $3,750 in a year, according to the AARP. They then had to pay 35% of the cost of brand-name drugs and 44% of generics.

In 2019, the donut hole mostly closed, according to the Kaiser Family Foundation.

People now pay 25% of the cost of brand-name drugs until they reach the catastrophic coverage threshold of $8,140, although they do have to pay 37% of generic drug costs after reaching the donut hole coverage limit of $3,820.

The new study was published May 28 in the Journal of the American Medical Association.

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