July 26, 2017
PCMA requested that Milliman estimate the value of direct and indirect remuneration (DIR) for Medicare Prescription Drug Plan (PDP) stakeholders. DIR includes manufacturer rebates, pharmacy performance-based price concessions, and any other subsidies or price concessions used to decrease the costs incurred by the Part D plan sponsor. This analysis estimates the historical, current, and projected value of DIR on individual prescription drug plan (PDP) program stakeholders, including the federal government, beneficiaries, and pharmaceutical manufacturers. Our analysis and estimates pertain only to the individual PDP market, not the Medicare Advantage prescription drug (MA-PD) or Part D employer group waiver plan (EGWP) markets.
Major findings from the Milliman study:
Total Value of DIR:
- DIR saved the standalone Part D program and its beneficiaries approximately $87.8 billion from the inception of the program through 2016.
- From 2017 through 2026, DIR is projected to save $308.2 billion.
Federal Savings from DIR:
- DIR will reduce the federal government’s costs for Part D by a projected $17.2 billion in 2017, a 26.6% savings compared to costs without any price concessions similar to DIR.
- From 2006 to 2016, DIR saved the federal government an estimated $75.4 billion.
- From 2017 to 2026, DIR will save the federal government a projected $259.6 billion.
Premium Savings from DIR:
- Since the inception of the Part D program through 2016, DIR saved Part D beneficiaries an estimated 21.5% on their premiums, a $12.4 billion savings.
- From 2017 through 2026, that savings is projected to increase to an average 33.2% on premiums, or $48.7 billion.
The study assumes Medicare Part D stakeholders do not change their behavior in response to changes in DIR levels.