Clawback Payments to Increase Significantly in CY 2016

The Medicare Modernization Act (MMA) that established the Medicare Part D prescription drug program requires states to make cost-sharing payments to the federal government, commonly known as the “clawback.” The Centers for Medicare & Medicaid Services (CMS) must notify states by October 15 of their clawback charges for the coming year. The recent CMS release indicates that the per-beneficiary monthly clawback charge to states will increase by 11.61% in calendar year (CY) 2016, the largest increase since the program’s inception.  Based on this rate increase, FFIS estimates that state payments will total $9.7 billion in CY 2016, an annual increase of more than $1 billion.

In recent years, the Part D program has benefited from a slowdown in prescription drug costs, particularly as major specialty medications have lost their patent protections. With the availability of new specialty drugs, such as those for hepatitis C, this trend appears to be reversing.