CBO’s Estimates of the Effects of Changes in the Manufacturers’ Discount in the Part D Coverage Gap
In a letter to Congressman Mark Meadows, CBO explains its estimate for section 53116 of the Bipartisan Budget Act requiring brand-name prescription drug manufacturers to increase the discount offered to some Medicare Part D beneficiaries.
Section 53116 of the Bipartisan Budget Act requires manufacturers of brand-name prescription drugs to increase from 50 percent to 70 percent the discount provided to certain Medicare Part D beneficiaries when those enrollees’ spending on brand-name prescriptions falls within a range called the coverage gap (sometimes referred to as the donut hole). When Part D was implemented, such beneficiaries who were not enrolled in the low-income subsidy (LIS) program were responsible for 100 percent of the cost of their prescriptions in that range of spending during a given year. (The law was changed in 2010 to require manufacturers of brand-name prescription drugs to provide a 50 percent discount to non-LIS beneficiaries.)
When that legislation was being considered, CBO estimated that section 53116 would reduce net Medicare spending for Part D by $7.7 billion over the 2018–2027 period. CBO subsequently learned of data that indicated a greater savings from enacting section 53116. This letter responds to questions from Congressman Mark Meadows about CBO’s estimate.