Rumor has it that the weather will be cooler in the DC-area this weekend and I am giddy. Outside time sounds great – a hike, a cocktail on the patio, maybe getting the friend group together to start planning the next ski trip… hope you get a chance to dream big too.  

Caught my Eye

If You Can’t Beat Them. This week AstraZeneca’s CEO said that the company was looking at direct to consumer selling for some products and was considering ways to lower U.S. pricing for future drugs. This is after last week’s announcement they were planning on building new manufacturing facility in Virginia. Reality or just playing rhetorical games, time will tell.

But Not Fast Enough. Yesterday the Trump Administration issued letters to AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Eli Lilly, EMD Serono, Genentech, Gilead, GSK, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer, Regeneron, and Sanofi requiring action within 60 days on Most Favored Nation. A Fact Sheet was posted online.

The letters tell manufacturers to provide MFN to every single MFN patient, promise that they will not offer better prices to other comparable countries for new drugs than the U.S. gets, tells them there will be a path to direct to consumer without middlemen if they sell at MFN prices and promises supporting trade policy. All this must be done “or else” with a threat of every tool in the federal arsenal. Which, if you’re new to policy, threats are not usually how things are done.

Again, this raises more questions than it answers. Is this a lawsuit waiting to happen? Why pick these companies? What about non-listed companies? What if there are competitor drugs that are not listed? What is MFN for these drugs? Medicaid is really low (and sometimes negative) for some drugs so is this really that different for many drugs? Does this do anything for patient affordability (spoiler – probably not).

Making a Mess and Fixing it Twice. Yesterday the Health Resources and Services Administration (HRSA) released an application process for a 340B Rebate Model Pilot Program. This model is in response to manufacturers requesting to move to a rebate model rather than a 340B purchase price.

The model is very limited. It will ONLY be for drugs included on the Medicare drug price negotiation list so basically a way to double-check that the Maximum Fair Price and 340B claims are going the right way. (Note – there were many ways to do effectuation of Maximum Fair Price and Medicare went the hardest way…#teamcoveragegapdiscount). Manufacturers will have to apply by September 15 and the pilot goes into effect on January 1.

When You See it Coming. This week Apteka released a paper commissioned by Alliance for Patient Access (AfPA) on the unintended consequences of the Medicare Part B negotiations starting in 2028.  

The path to operationalizing Part B negotiations is fraught with complexities. The mechanics of determining the Maximum Fair Price, the challenge of implementing new reimbursement models, and the potential for unintended consequences – particularly the impact on Average Sales Price and provider viability – demand careful observation and adaptation. Maybe most importantly, the impacts on beneficiaries will become clearer but limited access, increased direct costs, changes in site of care and access to new therapies are all legitimate concerns. You can read the paper here or find it on my website under Resources.  

Yawn. This week the Maryland prescription drug affordability board determined that two diabetes drugs were unaffordable. Affordability is a fantastic goal, but this isn’t the way to get there. We have a generic Farxiga and soon enough we’ll have one for Jardiance. And the potential path forward for Maryland to implement any savings would be through an Upper Payment Limit (UPL) and that isn’t likely to save patients any money, so it all seems inefficient. I’ll have more next week when a paper I worked on is released.

Christmas in Late July. A lot of Alzheimer’s news this week. Lifestyle changes improved cognition in some patients. The Alzheimer’s Association released clinical guidelines on blood biomarker testing.

OMG. Bat in mouth? I mean I know we’re supposed to read the article and think “wow, that healthcare bill” but no. Just no. I can’t get past bat.in.mouth.

Reviewing the Fundamentals – Calculating Part D Premiums

With this week’s Medicare Part D premium announcement, I wanted to do a refresh of how Part D premiums are calculated. I get asked a lot of questions about Part D premium increases and why they are expected to go up so much if there is a 6% premium increase cap as part of the Inflation Reduction Act. So let’s dig into how premiums are calculated.

Medicare Part D premiums are a blend of national averages, individual plan bids, and a significant stabilizing factor introduced by the Inflation Reduction Act (IRA).

The National Average Monthly Bid Amount (NAMBA)

The NAMBA is the foundation for Part D premium calculations. It represents the average estimated cost for Part D plans to provide the basic Part D benefit across the country.

• Each year, insurance companies that want to offer Part D plans submit bids to the Centers for Medicare & Medicaid Services (CMS). These bids detail how much the plan expects it will cost to cover the standard Part D benefits for an average enrollee, factoring in drug costs, administrative expenses, and profit.
• CMS then calculates the NAMBA as an enrollment-weighted average of all approved basic Part D plan bids. This means that bids from plans with more enrollees have a greater impact on the NAMBA than bids from smaller plans.
• The NAMBA serves as a benchmark for government subsidies to plans and helps determine the starting point for beneficiary premiums.

The Base Beneficiary Premium (BBP)

The BBP sets the stage for what beneficiaries pay in premiums. It’s derived from the NAMBA and aims to represent the beneficiary’s share of the basic Part D benefit.

• Historically, the BBP was calculated using a statutory formula, primarily as a percentage (25.5%) of the sum of the NAMBA and Medicare’s estimated reinsurance payments (Medicare’s payments to plans for very high-cost drug users). This percentage represents the portion of the average basic benefit cost that beneficiaries are generally expected to pay.
• The IRA significantly altered the BBP calculation by introducing a 6% cap on the BBP’s annual growth (for 2024 – 2029)
• How it works:
  • Medicare first calculates the BBP using the traditional statutory formula based on the NAMBA and reinsurance estimates.
  • If this calculated BBP would result in an increase of more than 6% from the previous year’s capped BBP (which, well, yeah) then the IRA’s provision kicks in and the BBP is then capped at a 6% increase.
  • Medicare (the government) then covers the difference between what the BBP would have been without the cap and the actual capped BBP. This effectively reduces the burden on beneficiaries by preventing premiums from rising as rapidly.

Example:

• The 2025 BP (capped) was $36.78
  • For 2026, the unadjusted BBP, calculated using the NAMBA and reinsurance, is $75.38. This would be a large increase.
  • However, due to the IRA’s 6% cap, the 2025 BBP is instead set at $38.99 (which is $36.78 * 1.06).
  • The difference of $36.39 ($75.38 – $38.99) is subsidized by Medicare, meaning beneficiaries do not pay this amount in their basic premium. Note that this almost double the amount from last year.

Calculating an Individual’s Plan Premium

While the NAMBA and BBP provide the national averages and a capped baseline, specific monthly Part D premiums depends on what plan a beneficiary chooses.

• Plan’s Basic Premium: A plan’s actual “basic premium” for an enrollee is determined by the difference between its specific bid and the NAMBA, adjusted by the BBP.
  • If a plan’s bid is lower than the NAMBA, its basic premium will be less than the BBP.
  • If a plan’s bid is higher than the NAMBA, its basic premium will be more than the BBP.
• Some Part D plans offer “enhanced” or “supplemental” benefits beyond the basic Part D coverage (e.g., lower deductibles, richer coverage in certain phases). The cost of these added benefits is layered on top of the basic premium.

For the Files

Everything you ever wanted to know about Medicare Advantage. But save it for when you have time to focus (so maybe not a Friday in the summer.)