Overview of the Medicare Part D Benefit Redesign for PACE

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CMS has announced significant changes to Medicare Part D in 2025. Two of these will impact PACE organizations:

  • The new Manufacturer Discount Program
  • Cost-sharing changes, specifically to the coverage gap (or “the donut hole”)

What are the changes and how can PACE leaders prepare? Here are the details!

New Manufacturer Discount Program

PACE organizations will be required to participate in the new Manufacturer Discount Program, which will provide cost savings to you.

How does it work?

  • The program requires manufacturers to discount certain brand-name drugs.
  • Discounts will be 10% for initial coverage and 20% for catastrophic coverage.
  • CMS will make prospective payments—calculated based on bid projections and enrollment—to PACE organizations to cover funds advanced to pay the discounts.
  • CMS will take back prospective payments in the next payment month based on the amount invoiced to the manufacturer and a cost-based reconciliation.
  • The new Manufacturer Discount Program does not replace manufacturer rebates.

What will PACE organizations need to do differently?

  • Report additional Prescription Drug Event (PDE) data, including participant progress through the Part D benefit, to determine their manufacturer discounts.
  • Work directly with CMS’s Third-Party Administrator (TPA) to receive quarterly payments from manufacturers. The TPA will contact the PACE organization, working with the liaison listed in the Health Plan Management System (HPMS).
  • Maintain your direct and indirect remuneration (DIR) reporting. Discounts are not considered DIR, so no additional DIR reporting will be required.

CMS will provide training and technical assistance for PACE organizations, with specific PDE guidance expected in May 2024. The Pharmastar® team is also here to support you!

How will Pharmastar support clients?

  • Pharmastar can help ensure compliance with PDE data requirements. We track TrOOP and benefit phases; are knowledgeable of the additional PDE fields and reporting; and are reviewing the PDE file layouts and instructions.
  • We are preparing for 2025 Certification (CERT) testing, expected in September.
  • Pharmastar will continue to administer the manufacturer rebate program for clients we do today and can add rebate submissions to your plan, if not included. (This should be added to your 2025 agreement ahead of the June bid deadline.)
  • Your Client Success Specialist is here to help! Contact us for more info about the Manufacturer Discount Program or to discuss rebate submissions.

Cost-Sharing Changes

Currently, Medicare Part D has four distinct benefit phases: deductible, initial coverage, coverage gap (the “donut hole”), and catastrophic. Tracking participant progress through these phases is needed for accurate PDE data.

What is changing in 2025?

  • The coverage gap (donut hole) is being eliminated.
  • Cost shares for members, plan sponsors, manufacturers, and Medicare are changing.

How will this impact the 2025 bid?

Changes in the Part D Defined Standard benefit—including plan costs in the initial and catastrophic phases—will need to be considered. Cost estimates in the bid will be used to calculate 2025 PACE payments, including the cost-sharing add-on amount.

Here are some things to keep in mind:

  • PACE enrollees have no cost share.
    • Cost shares for the deductible and initial coverage phases are subsidized.
    • Maximum Out of Pocket (OOP) expenses will be capped at $2,000.
  • Plan sponsors will be responsible for a larger percentage of drug costs.
    • Non-applicable drugs (generic) – 75% up to OOP threshold ($2,000), then 60% in the catastrophic phase.
    • Applicable drugs (brand) – 65% up to OOP threshold ($2,000), then 60% in the catastrophic phase.
  • Government reinsurance is reduced:
    • From 80% to 20% on brand drugs.
    • From 80% to 40% on generic drugs.
  • Discounts on brand drugs will be applied 10% during initial coverage phase and 20% during the catastrophic phase, per the new Manufacturer Discount Program.

Pharmastar is here to support you! Please contact your Client Success Specialist with questions .

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