The PDM Model is a voluntary, five-year demonstration program introduced in 2020 to reduce federal reinsurance spending by sharing savings with participating Medicare Part D plans. As of 2021, only two plan sponsors had joined, primarily due to misaligned incentives in the current rebate environment where higher rebates from high-list-price drugs can offset plan costs and lower premiums, despite contributing to higher reinsurance spending.
Key changes and flexibilities for 2022 include:
- Removal of status from five of the six Medicare Part D "protected" classes (antiretrovirals remain protected until 2023).
- Reduction in the requirement of two drugs per class to one drug per class in formulary development.
- Additional flexibilities: Medication Therapy Management+ (MTM+) programs, limited initial days' supply, smoothing of beneficiary cost sharing, reduced cost sharing on generics and biosimilars for low-income subsidy (LIS) beneficiaries, and a higher de minimis threshold for plans targeting the low-income benchmark (LIB).
The model works by comparing actual federal reinsurance spending (net of rebates) to a benchmark calculated by CMS retrospectively. Plan sponsors receive 30% of savings between 0% and 3%, 50% above 3%, with a minimum threshold (MT%) of 0.5% for 2022. Downside risk was temporarily removed for 2022 but may return in future years.
Challenges include operational complexity, selection of flexibilities based on plan-specific factors, timing constraints, regional participation requirements, potential impacts on medical costs, and additional participation costs. The potential introduction of point-of-sale (POS) rebates in 2023 could better align incentives and make the PDM Model more attractive.
Interested plan sponsors should contact their PBMs to assess feasibility and key dates, including a Notice of Intent (NOI) due by March 1, 2021, and model applications due by April 16, 2021. CMS will provide provisional approval in May, with final confirmation as part of Part D bid submissions by June 7, 2021.
