March 26, 2008

PricewaterhouseCoopers (PwC) was retained by the Pharmaceutical Care Management Association (PCMA) to estimate the fiscal impact of so-called “prompt payment” legislation mandating that Medicare prescription drug plans (PDPs) reimburse pharmacy claims within 14 days.

We find that this legislation could increase costs to the Medicare program and its beneficiaries by $3.3 to $7.8 billion over the next decade. The impact depends on how various costs are shifted between Part D plan sponsors and pharmacies (as shown in the table below). We estimate that the ten-year costs to the Medicare program would be about $2 billion after accounting for PDPs renegotiating retail pharmacy contracts to offset pharmacy gains caused by the legislation. Medicare beneficiaries would also pay $1.3 billion in additional premiums and cost sharing. In the absence of contract renegotiations offsetting pharmacy gains, government costs would increase by $4.7 billion and beneficiary costs would increase by $3.1 billion.

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