New Analysis Shows Significant Savings to Medicare Patients, Limited Budgetary Impact of ‘Flat Copayment Policy’ for Prescription Drugs

New research supported by the Alliance for Aging Research shows significant beneficiary savings, limited budgetary impact of expanding maximum flat copayment policy

WASHINGTON, DC (Nov. 15, 2022) — A new analysis highlights how a proposed $35 limit on the cost of individual prescription drugs covered by Medicare Part D would have a positive impact on total spending for qualifying beneficiaries. The study was released today by the Alliance for Aging Research (the Alliance) in partnership with researchers at Avalere Health.

The new proposal, developed by the Alliance’s Project Lowering Out-of-Pocket Costs (Project LOOP) initiative, would create a maximum $35 copay for monthly prescription fills for Part D beneficiaries. However, the $35 copay is a maximum, and many drugs are expected to remain less expensive than the $35 limit. The Centers for Medicare and Medicare Services (CMS) previously tested a $35 monthly copayment for insulin in the Medicare program, which was recently codified in the Inflation Reduction Act of 2022. 

The new analysis shows that the addition of a flat copayment policy for all Part D drugs could result in significant savings for patients. The need for additional policies to support patient affordability was reinforced by the White House’s Oct. 14, 2022, Executive Order on Lowering Prescription Drug Costs for Americans, which asked the CMS Innovation Center to submit recommendations for additional models to lower patients’ drug costs no later than Jan. 12, 2023. 

“Evidence continues to mount that high out-of-pocket costs for prescription drugs lead to lower adherence, worse outcomes, and costs elsewhere in the healthcare system,” said Michael Ward, the Alliance’s Vice President of Public Policy and Government Relations. “This analysis shows that it is within the grasp of Congress to not only place an upper limit on out-of-pocket costs but to make prescription drugs affordable for Medicare beneficiaries.” 

The Avalere analysis indicates that instituting a maximum copay of $35 for drugs covered by Medicare Part D would:

• Reduce out-of-pocket costs by an average of 45 percent, or $339 per eligible beneficiary, in comparison to projected spending after the implementation of the Inflation Reduction Act’s affordability provisions
• Increase spending on Part D by 3 percent
• Have a small impact (1 percent) on total Medicare premiums

The Avalere analysis also examined the impact of creating a separate maximum copay for specialty drugs but found that such a policy would have a de minimis impact on federal outlays and beneficiary savings relative to a $35 cap across all drugs.  

Additional information on the maximum flat copayment proposal, including an overview of the policy, an infographic, and a link to Avalere’s analysis, can be found at www.agingresearch.org. 

The Alliance for Aging Research is the leading nonprofit organization dedicated to accelerating the pace of scientific discoveries and their application to vastly improve the universal human experience of aging and health. The Alliance believes advances in research help people live longer, happier, more productive lives and reduce healthcare costs over the long term. For more than 30 years, the Alliance has guided efforts to substantially increase funding and focus for aging at the National Institutes of Health and Food and Drug Administration; built influential coalitions to guide groundbreaking regulatory improvements for age-related diseases; and created award-winning, high-impact educational materials to improve the health and well-being of older adults and their family caregivers. For more information, visit www.agingresearch.org. 

Avalere Health, part of Fishawack Health, brings innovative, data-driven solutions to complex healthcare challenges. Avalere is a healthcare consulting firm that helps companies address questions related to policy, market access, and evidence & strategy. Avalere’s customers span the healthcare continuum including life sciences companies, leading health plans, top healthcare providers, and healthcare investors. Visit us at www.avalere.com and follow us on Twitter and LinkedIn.

For more information about the Alliance for Aging Research or to interview an expert on this topic, please contact Katie Riley, Vice President of Communications, Alliance for Aging Research, at [email protected] or Ryan Urgo, Managing Director, Avalere Health, at [email protected].