July 29, 2014

The Pharmaceutical Care Management Association (PCMA) has retained Milliman to analyze the cost impact of the new hepatitis C virus (HCV) drug therapies on the 2015 individual Medicare Part D program. There are an estimated 3.2 million people in the United States infected with HCV, many of whom are undiagnosed. Of these 3.2 million people in the United States infected with HCV, approximately 270,000 were enrolled in Medicare Part D in 2013. Therefore, expensive HCV treatments will have a significant impact on individual Medicare Part D spending.

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Major Findings

We estimate that the cost of new HCV drug therapies, including Sovaldi and Olysio, will increase 2015 federal spending on the individual Medicare Part D program by approximately $2.9 billion to $5.8 billion. This is equivalent to a 6% to 11% increase in federal Part D spending or approximately $100 to $200 per Medicare Part D beneficiary per year.

We estimate that the cost of HCV drug therapies will increase total annual individual Medicare Part D beneficiary premiums by $481 million to $965 million in 2015. This is equivalent to a 4.3% to 8.6% increase over 2014 beneficiary premiums or an additional $17 to $33 per beneficiary per year.

The analysis underlying this report uses a representative 2015 Prescription Drug Plan (PDP) bid developed from a comprehensive Medicare Part D claims database using the defined standard benefit design. While the actual bid impact for a particular PDP will vary based on the projected population and many other variables, we used a representative bid with the entire individual Medicare population modeled to illustrate the program cost for 2015 with and without coverage of the new HCV drugs. The Medicare Part D Bid Pricing Tool (BPT) worksheets that were generated for both scenarios are shown in the technical appendix and serve as the basis for our cost estimates. Assumptions are discussed in the Representative Plan Bid Development Assumptions subsection of this report.

The findings contained in this report are limited to the cost impact of new HCV drugs. The new HCV drugs are designed to cure hepatitis C. The cost impact does not reflect potential savings from reductions in other medical costs which may result from using the new drugs (e.g., treatment of chronic liver disease).