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Medicare Part D in Its Ninth Year: The 2014 Marketplace and Key Trends, 2006-2014

Introduction
  1. Centers for Medicare & Medicaid Services, Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Data as of February 2014) (available at http://www.cms.gov/MCRAdvPartDEnrolData/MCESR/list.asp).

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  2. Part D allows employer or union group health plan sponsors to enroll Part D eligible individuals in PDPs or MA-PD plans that are designed and open only to individuals affiliated with these sponsors. CMS publishes enrollment numbers for these employer-only plans, but does not release benefit design characteristics. As a result, employer-only plans are excluded from much of the analysis in this report.

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  3. Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA)

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  4. All Medicare Part D Data analysis is available at http://kff.org/medicare/resources-on-the-medicare-prescription-drug-benefit-2/. These analyses build on two previous reports prepared for the Kaiser Family Foundation that provided an in-depth look at Medicare drug plans in 2006 and 2007. See Jack Hoadley et al., “An In-Depth Examination of Formularies and Other Features of Medicare Drug Plans,” April 2006, available at http://kff.org/medicare/report/an-in-depth-examination-of-formularies-and/; and Jack Hoadley et al., “Benefit Design and Formularies of Medicare Drug Plans: A Comparison of 2006 and 2007 Offerings,” November 2006, available at http://kff.org/medicaid/report/benefit-design-and-formularies-of-medicare-drug/. This report also incorporates analysis of Part D data prepared by Elizabeth Hargrave and Katie Merrell (Social & Scientific Systems) for the Medicare Payment Advisory Commission (MedPAC). See methodology.

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Section 1: Part D Enrollment and Plan Availability
  1. Part D allows employer or union group health plan sponsors to enroll Part D eligible individuals in PDPs or MA-PD plans that are designed and open only to individuals affiliated with these sponsors. CMS publishes enrollment numbers for these employer-only plans, but does not release benefit design characteristics. As a result, employer-only plans are excluded from much of the analysis in this report.

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  2. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2014.

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  3. For additional discussion of this topic, see Frank McArdle, Tricia Neuman and Jennifer Huang, “Retiree Health Benefits at the Crossroads,” Kaiser Family Foundation, April 2014. http://kff.org/medicare/report/retiree-health-benefits-at-the-crossroads/.

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  4. 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, July 2014.

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  5. This look at market concentration focuses on the total program, including both PDPs and MA-PD plans. Other analysis shows that enrollment in Medicare Advantage plans (including plans that do and do not offer the Part D benefit) is concentrated in a handful of firms, with two firms (UnitedHealth and Humana) having 37 percent of Medicare Advantage enrollment. See Marsha Gold et al., “Medicare Advantage 2014 Spotlight: Enrollment Market Update," Kaiser Family Foundation, May 2014, available at http://kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/.

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  6. The marketplace analysis in this section, unlike other parts of the analysis, incorporates both PDPs and MA-PD plans and includes plans in the territories and plans offered exclusively to retirees from a particular employer.

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  7. The five firms are Caremark (later acquired by CVS), Member Health, Universal American, RxAmerica, and Health Net.

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  8. Most MA-PD plans are not offered on a regional basis, so this analysis is based only on PDP offerings.

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  9. Market competition among PDPs, as measured by the Herfindahl index, averages 1088 across the 34 regions for overall enrollment, down from 1262 in 2013 and 1474 in 2011, but above the 2010 level of 909. The comparable index value computed nationally for 2014 is 880. According to current guidelines used by the Department of Justice and the Federal Trade Commission, the Part D market is not concentrated. The guidelines indicate that markets in which the index is between 1500 and 2500 points are considered to be moderately concentrated, and those in which the index is in excess of 2500 points are considered to be highly concentrated. Overall, 4 of 34 regions qualify as moderately concentrated, while the other 30 are not concentrated.

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  10. In 2014, the non-LIS population reaches the level considered moderately concentrated in 11 of 34 regions and highly concentrated in another 2 regions. Comparable numbers for the LIS population are 13 moderately concentrated regions and 3 highly concentrated regions.

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  11. The estimate here includes only those MA plans that include Part D benefits. Overall, the average beneficiary has 18 MA plans available. Marsha Gold et al., “Medicare Advantage 2014 Spotlight: Enrollment Market Update,” Kaiser Family Foundation, May 2014, available at http://kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/.

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  12. CMS, “Announcement of Calendar Year (CY) 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” April 2014.

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  13. Two different enhanced PDPs offered by one national sponsor average only about 560 per region. The PDPs offered by one of the new sponsors in 2014 average just 101 enrollees, and the PDPs offered by a new market entrant in 2013 average just 74 enrollees per region.

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  14. “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs; Final Rule, May 23, 2014. http://www.gpo.gov/fdsys/pkg/FR-2014-05-23/pdf/2014-11734.pdf.

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  15. This count excludes drug plans offered by Special Needs Plans, a type of Medicare Advantage Plan that limits membership to beneficiaries with specific diseases or characteristics. In 2014, 560 SNPs are offered; see Marsha Gold et al., “Medicare Advantage 2014 Spotlight: Plan Availability and Premiums,” Kaiser Family Foundation, December 2013, available at http://kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-plan-availability-and-premiums/.

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Section 2: Part D Premiums
  1. The 2014 average reported here ($37.75) is lower than the amount reported in the 2013 “First Look” spotlight ($39.90) because the new average is weighted by actual 2014 enrollment. Jack Hoadley et al., “Medicare Part D: A First Look at Plan Offerings in 2014,” October 2013, available at http://kff.org/medicare/issue-brief/medicare-part-d-a-first-look-at-plan-offerings-in-2014/. The average amount is lower because net switches in plan enrollment in the fall open enrollment season (including LIS beneficiaries reassigned to new plans by CMS) were to lower-premium plans. Averages for some previous years differ by small amounts because different months are used for comparability.

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  2. This increase is similar to the 51 percent increase in the monthly premium between 2006 and 2014 for a single person enrolled in FEHB BC/BS (from $125.82/month in 2006 to $190.28/month in 2014).

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  3. For additional discussion of factors involved in the slow growth in costs, see Jack Hoadley, “Medicare Part D Spending Trends: Understanding Key Drivers and the Role of Competition,” May 2012, available at http://kff.org/health-costs/issue-brief/medicare-part-d-spending-trends-understanding-key/.

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  4. This estimate is based on historical and projected expenditures published on the CMS website, available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html.

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  5. The average premium excludes Special Needs Plans. The overall premium in 2014 for MA plans that include drug coverage is $35 per month, down 20 percent from 2010; see Marsha Gold et al., “Medicare Advantage 2014 Spotlight: Enrollment Market Update,” April 2014, available at http://kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/.

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  6. Information on these rebates is not available at the plan level. In 2013, CMS (personal communication) calculated that the average MA-PD premium prior to rebates was $9.50 per month lower than those for PDPs. Thus, the average plan applies a rebate amount of about $15.50 to lower the premium.

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  7. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/.

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  8. The third plan with a lower 2014 premium (SilverScript Basic) had an 11 percent drop in enrollment, but was not open to new enrollment during the annual enrollment period due to sanctions imposed by CMS.

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  9. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/.

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  10. These estimates for MA-PD plan sponsor shares of enrollment are slightly different from enrollment estimates in Gold et al. (May 2014, see endnote 15) because they exclude enrollees in Medicare Advantage plans that do not include Part D coverage.

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  11. Like the national averages, other averages presented here are weighted based on February 2014 enrollment.

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  12. Jack Hoadley et al., “Medicare Part D 2010 Data Spotlight: A Comparison of PDPs Offering Basic and Enhanced Benefits,” December 2009, available at http://kff.org/medicare/report/medicare-part-d-2010-data-spotlight-a/.

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  13. The premium difference between the two types of enhanced plans is even greater ($107.85 versus $47.88) if Humana’s enhanced PDPs are excluded. In 2014, Humana’s second enhanced PDP does not meet the standard of covering “at least some” brand drugs in the coverage gap.

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  14. Some of this discussion is taken from the lead author’s blog at http://healthaffairs.org/blog/2014/03/04/assessing-a-cms-proposal-to-improve-competition-among-medicare-part-d-drug-plans/.

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  15. “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs; Final Rule, May 23, 2014. http://www.gpo.gov/fdsys/pkg/FR-2014-05-23/pdf/2014-11734.pdf.

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Section 3: Part D Benefit Design and Cost Sharing
  1. In the program’s first two years, a small subset of enrollees were in PDPs with one tier each for brand and generic drugs, but use of this model had nearly disappeared by 2012.

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  2. This analysis does not examine differences in tier placement of specific drugs or whether some plans cover more drugs than others on specific tiers.

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  3. For 2013 estimates for employers, see Kaiser Family Foundation/HRET Survey of Employer-sponsored Health Benefits, available at http://kff.org/private-insurance/report/2013-employer-health-benefits/.

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  4. Express Scripts, “The 2013 Drug Trend Report,” April 2014.

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  5. CMS, “Medicare Part D Specialty Tier,” April 7, 2014. http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/SpecialtyTierMethodology.pdf.

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  6. CMS, “Medicare Part D Manual, Chapter 6, Part D Drugs and Formulary Requirements,” March 9, 2007.

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  7. Tricia Neuman, Jack Hoadley, and Juliette Cubanski, “The Cost Of A Cure: Medicare’s Role In Treating Hepatitis C,” available at http://healthaffairs.org/blog/2014/06/05/the-cost-of-a-cure-medicares-role-in-treating-hepatitis-c/.

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  8. These results are from analysis for MedPAC, conducted by Elizabeth Hargrave and Katie Merrell (see note 4). For that analysis, the universe of drugs includes all unique chemical entities in the CMS reference file. For example, plans are considered to cover a drug if they cover any version of drug, for example if they cover a generic version but not the brand version or if they omit certain forms or strengths of the drug. Formulary data were unavailable for the SilverScript plans offered by CVS Caremark, because these plans were under sanction at the time of the annual enrollment period.

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  9. Plans must list at least two drugs in every drug category and class, as well as most or all drugs in six protected classes. See CMS, Chapter 6, “Part D Drugs and Formulary Requirements” in the Medicare Part D Manual, available at http://www.cms.hhs.gov.

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  10. These results are also from the analysis for MedPAC (see note 4). That analysis classifies a drug as having a particular type of utilization management if that characteristic applies to any form or strength of the drug that is on the lowest possible tier used by that plan for that drug.

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  11. We classify plans labeled by CMS as covering few brands or few generics (defined as less than 10 percent of drugs in a particular category) as having “little or no coverage.” We have not analyzed information on which drugs are included in the “few” drugs covered by these plans. Similarly our category “mostly generics only” includes plans that add just a “few” brand drugs to their coverage of generics.

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  12. Another 25 percent of MA-PD plans have gap coverage for a “few” drugs in the gap, but these plans are excluded from our definition of gap coverage.

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  13. This estimate excludes enrollees in plans covering only a “few” drugs in the gap.

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  14. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 3, March 2009.

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  15. PDPs offering an enhanced benefit, but little or no gap coverage, have a modestly higher average premium ($42.54) than the average for all PDPs with little or no coverage in the gap.

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  16. CMS has indicated that, as of 2015, it will no longer refer to preferred or non-preferred pharmacies; instead it will use the terminology of pharmacies that offer standard or preferred cost sharing.

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  17. Cost-sharing differentials across pharmacy types do not apply to LIS beneficiaries, because LIS cost-sharing amounts are set by law and updated in regulation each year. The government, however, is responsible for the higher cost sharing if the LIS beneficiary uses a non-preferred pharmacy.

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  18. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2014.

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  19. CMS, “Part D Claims Analysis: Negotiated Pricing Between Preferred and Non-Preferred Pharmacy Networks,” April 30, 2013. http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/PharmacyNetwork.pdf. Note that this study did not name the plans.

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  20. Pharmacy network information for this analysis was obtained from the online Part D Plan Finder. When a zip code is entered, the Plan Finder sets various mileage ranges for display. In a more densely populated urban area, lower mileages are used, whereas a greater mileage is used for more rural areas.

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  21. CMS, “Announcement of Calendar Year (CY) 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” April 2014.

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  22. Milliman, “The Impact of Preferred Pharmacy Networks on Federal Medicare Part D Costs, 2014-2023,” report prepared for the Pharmaceutical Care Management Association, October 2013.

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Section 4: The Low-Income Subsidy Program
  1. Laura Summer, Jack Hoadley, and Elizabeth Hargrave, “The Medicare Part D Low-Income Subsidy Program: Experience to Date and Policy Issues for Consideration,” Kaiser Family Foundation, September 2010,” available at http://kff.org/medicare/issue-brief/the-medicare-part-d-low-income-subsidy/.

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  2. For example, for 2013 enrollees in Community CCRx Basic PDPs in 19 regions were transferred into the SilverScript Basic PDPs as a result of the acquisition of Universal American by CVS Caremark in 2011. There were no new examples in 2014.

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  3. This excludes 16 plans where 210,000 LIS enrollees could be transferred to other benchmark plans offered by the same sponsor as a result of mergers; most of these were First Health PDPs acquired by Aetna.

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  4. In addition, another 124,000 enrollees who were in MA-PD plans that exited the market are classified as reassigned to a new PDP by CMS, but are not included in our counts. Many of these were reassigned to PDPs operated by the same sponsor as their MA-PD plan, unless they chose another MA-PD plan. Those who had no PDP available from the same sponsor were randomly reassigned to a PDP.

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Section 5: Part D Performance Ratings
  1. Star ratings are assigned at the contract level, not the plan level, and many plan sponsors operate all their PDPs under the same contract. Thus, Humana’s older and more expensive Enhanced PDP, the Preferred Rx PDP, and the newly offered Walmart Rx PDP are all assigned the same ratings even if enrollees in one plan rate them differently on satisfaction measures or have different outcomes.

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  2. Because the cut points by which CMS translates scores on the ratings criteria to stars is different for PDPs and MA-PD plans, comparisons between the star ratings should be viewed with some caution.

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  3. See Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/report-section/to-switch-or-not-to-switch-issue-brief/, for the data and methods used for this finding.

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  4. Gretchen Jacobson et al., “How Are Choosing and Changing Health Insurance Plans?” Kaiser Family Foundation, May 2014, available at http://kff.org/medicare/report/how-are-seniors-choosing-and-changing-health-insurance-plans/.

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Conclusion
  1. Jack Hoadley, “Medicare Part D Spending Trends: Understanding Key Drivers and the Role of Competition,” May 2012, available at http://kff.org/health-costs/issue-brief/medicare-part-d-spending-trends-understanding-key/.

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  2. “2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” May 2013; “Congressional Budget Office's April 2014 Medicare Baseline”; Tricia Neuman, Jack Hoadley, and Juliette Cubanski, “The Cost Of A Cure: Medicare’s Role In Treating Hepatitis C,” available at http://healthaffairs.org/blog/2014/06/05/the-cost-of-a-cure-medicares-role-in-treating-hepatitis-c/.

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  3. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/report-section/to-switch-or-not-to-switch-issue-brief/.

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  4. Jack Hoadley, Katie Merrell, Elizabeth Hargrave, and Laura Summer, “In Medicare Part D Plans, Low or Zero Copays and Other Features to Encourage the Use of Generic Statins Work, Could Save Billions,” Health Affairs 31(10): 2266-2275, October 2012.

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Exhibit 1.1

Medicare Part D Enrollment, by Type of Plan (Employer and Non-Employer PDP and MA-PD), 2006-2014
x

Exhibit 1.2

Share of Medicare Beneficiaries Enrolled in Medicare Part D Plans, by State, 2014
x

Exhibit 1.3

Share of Medicare Part D Enrollees in Stand-Alone PDPs, by State, 2014
x

Exhibit 1.4

Enrollment in Employer-Only Medicare Part D Plans, by Plan Type, 2006-2014
x

Exhibit 1.5

Distribution of Medicare Part D Enrollment, by Firm, 2014
x

Exhibit 1.6

Top 10 Firms Offering Medicare Part D Plans Ranked by 2014 Enrollment
x

Exhibit 1.7

Top 10 Medicare Part D Plans Ranked by 2014 Enrollment
x

Exhibit 1.8

Enrollment in Medicare Stand-Alone PDPs offered by Major PDP Sponsors, 2006-2014
x

Exhibit 1.9

Top 5 Medicare Part D Stand-Alone PDPs, Ranked by 2014 LIS Enrollment and Non-LIS Enrollment
x

Exhibit 1.10

Number of Medicare Part D Stand-Alone PDPs, 2006-2014
x

Exhibit 2.1

Weighted Average Monthly Premiums for Medicare Part D Stand-Alone PDPs, 2006-2014
x

Exhibit 2.2

Examples of Medicare Part D Stand-Alone PDPs with Lowest and Highest Premiums, 2014
x

Exhibit 2.3

Medicare Part D Weighted Average Monthly Premiums, by Plan Type, 2006-2014
x

Exhibit 2.4

Premiums for Medicare Part D Stand-Alone PDPs with Highest 2014 Enrollment
x

Exhibit 2.5

Premiums for Medicare Part D Stand-Alone PDPs with Highest 2014 Enrollment, 2006-2014
x

Exhibit 2.6

Weighted Average Premiums for Medicare Part D Basic Stand-Alone PDPs, by Region, 2014
x

Exhibit 2.7

Minimum and Maximum Monthly Premiums for National and Near-National Basic Stand-Alone PDPs, 2014
x

Exhibit 2.8

Minimum and Maximum Monthly Premiums for Medicare Part D Basic Stand-Alone PDPs, by Region, 2014
x

Exhibit 2.9

Weighted Average Monthly Premiums for Stand-Alone PDPs, by Type of Plan and Benefit Package, 2014
x

Exhibit 3.1

Share of Medicare Part D Stand-Alone PDPs, By Deductible Amount, 2006-2014
x

Exhibit 3.2

Median Cost Sharing for Medicare Part D Plans, 2006-2014, and Employer-Sponsored Plans, 2013
x

Exhibit 3.3

Median Cost-Sharing Amounts for Generic and Brand-Name Drugs, by Plan Type, 2014
x

Exhibit 3.4

Share of Enrollment in Medicare Part D Plans with Specialty Tiers, by Coinsurance Rate, 2010-2014
x

Exhibit 3.5

Share of Covered Drugs with Utilization Management (UM) Restrictions Across All Medicare Part D Stand-Alone PDPs, 2007-2014
x

Exhibit 3.6

Share of Enrollment in Medicare Part D Plans, By Level of Gap Coverage, 2006 and 2014
x

Exhibit 3.7

Weighted Average Monthly Premiums for Medicare Part D Stand-Alone PDPs, by Gap Coverage Level, 2014
x

Exhibit 3.8

Number of Medicare Part D Stand-Alone PDPs using Preferred Pharmacy Networks, 2011-2014
x

Exhibit 4.1

Share of Medicare Part D Enrollees Receiving Low-Income Subsidies, by State, 2014
x

Exhibit 4.2

Distribution of Medicare Part D Stand-Alone PDPs, by Benchmark Status, 2006-2014
x

Exhibit 4.3

Distribution of Monthly Premiums for Low-Income Subsidy PDP Enrollees Paying Premiums, 2006-2014
x

Exhibit 4.4

Weighted Average Monthly Premiums for Low-Income Subsidy PDP Enrollees Paying Premiums, 2006-2014
x

Exhibit 4.5

Number of Low-Income Subsidy PDP Enrollees Paying Monthly Premiums, 2006-2014
x

Exhibit 5.1

Share of Medicare Part D Stand-Alone PDPs and PDP Enrollees, by Plan Star Ratings, 2014

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