In our prior trend report, we discussed emerging utilization and unit cost trends in the Part D market through the third quarter of 2024. This iteration of our trend series presents a more detailed review of utilization and cost patterns in the individual Part D market (i.e., excluding employer group plans) through the fourth quarter of 2024. Of note, we observe significant increases in specialty drug utilization; across all market segments, specialty1 utilization increased by nearly 10% between 2023 and 2024. This is largely driven by a 24% increase in specialty utilization among the non-low income (NLI) population between 2023 and 2024. While parsing out the secular utilization trend from any induced utilization driven by the removal of cost sharing in the catastrophic phase in 2024 is difficult, we assume the trends observed between 2023 and 2024 for the NLI population are heavily influenced by Part D benefit changes enacted by the Inflation Reduction Act (IRA) of 2022 given the wide gap in trends between NLI and LI beneficiaries.
Key findings
Specialty utilization trends among NLI beneficiaries outpace those of LI beneficiaries.
We observe a significant upward trend throughout CY2024 in specialty drug utilization, particularly pronounced among NLI beneficiaries. Figure 1 shows the year-over-year utilization trend by quarter (e.g., 2024Q1 relative to 2023Q1) among NLI and LI beneficiaries in Medicare Part D.
Figure 1: NLI vs. LI beneficiary trend in specialty drug utilization per 1,000, 2024 vs. 2023
NLI beneficiaries drive the specialty utilization trend in 2024; prescription drug plans (PDPs) see the greatest impact.
Throughout 2024, specialty drug utilization among NLI beneficiaries enrolled in PDPs increased 36%, whereas specialty drug utilization among NLI beneficiaries enrolled in Medicare Advantage Prescription Drug (MAPD) plans increased 21% from Q1 to Q4 2024 (Figure 2). In comparison, the specialty utilization among LI beneficiaries increased 14% on average over the same period. Utilization patterns of beneficiaries enrolled in PDPs also appear to exhibit a greater degree of seasonality, with a sharper decline in Q1, relative to beneficiaries enrolled in MAPD plans. This may be due to the greater prevalence of $0 deductibles and copays among MAPD plans relative to PDPs in 2023 and 2024. Of note, many MAPD plans added deductibles and/or moved brand cost sharing from copays to coinsurance in 2025. This may drive some convergence in utilization patterns between NLI beneficiaries in PDP and MAPD plans as there will be fewer differences in plan designs in 2025.
Figure 2: NLI beneficiary specialty drug utilization per 1,000
Among many of the top drug classes, 2024 drug utilization trends for NLI beneficiaries significantly outpaced utilization trends for LI beneficiaries.
While the overall drug utilization levels of LI beneficiaries remain much higher than those of NLI beneficiaries, utilization trends of certain high-cost therapies are markedly different between NLI and LI beneficiaries in 2024. Among the top five drug classes, the difference between NLI and LI trends for autoimmune agents and immunomodulators is particularly high (Figure 3), likely driven by the introduction of a maximum out-of-pocket (MOOP) limit that affects NLI beneficiaries more than LI beneficiaries, whose copays are already heavily subsidized.
Figure 3: CY2024 vs. CY2023 drug utilization trend: top five classes2
Average cost trends decreased despite increases in utilization trends.
While average utilization trends increased modestly for both MAPD and PDP beneficiaries in 2024, allowed cost per 30-day equivalent script trends decreased, falling approximately 6% for PDP beneficiaries and 1% for MAPD beneficiaries. The reduction in average cost per script demonstrates a large increase to the average point-of-sale (POS) discount driven by the requirement to move pharmacy direct and indirect remuneration (DIR) to the POS as outlined in the 2023 Centers for Medicare and Medicaid Services (CMS) final rule as well as several high volume drugs reducing list prices in 2024 (e.g., several insulins and inhalers).3,4 Figure 4 shows that the 5% differential between PDP and MAPD implies a larger DIR to POS discount conversion for PDP sponsors relative to MAPD sponsors. Further, the average cost per script decline is particularly driven by large decreases in the average cost of generics compared to brands, where we observe decreases of more than 20% for generics and more modest decreases in the average cost per script of brand drugs between 2023 and 2024.
Figure 4: CY2024 vs. CY2023 average allowed cost per 30-day trends
Conclusion
The utilization patterns observed in the last quarter of 2024 confirmed expectations of beneficiary utilization changes in response to legislative changes enriching the Part D benefit. Reviewing these trends by income status reveals that NLI beneficiary utilization trends are significantly outpacing those of the LI beneficiary population. Further, reviewing year-over-year trends in the average cost per script between PDP and MAPD claim utilization reveals a large difference in the effects of the requirement of DIR at POS enacted by the 2023 CMS Final Rule.
In our next article, we will review emerging Q1 2025 Part D claims patterns as the first year of the Medicare Part D benefit redesign will be in place with a $2,000 MOOP limit along with the first year of the Medicare Prescription Payment Plan (M3P). If the trends described in this article continue to hold true, we expect NLI beneficiary drug utilization trends to continue to outpace those of LI beneficiaries throughout 2025, given the incremental marked reduction in financial barriers for NLI beneficiaries in 2025.
Data and methodology
Milliman Medicare Market Intelligence (MedIntel) provided the data underpinning this whitepaper. The MedIntel platform is built upon CMS’s 100% Research Identifiable Files (RIF), highly enriched with supplementary data assets, and curated to address the needs of all Medicare stakeholders (plan sponsors, pharmacy benefit managers, manufacturers, providers, and others). Data are refreshed with as little as two weeks of lag, offering MedIntel subscribers near real-time insights to support their business needs. We relied on RIF data from January 2023 through December 2024, including claim costs from 100% of beneficiaries enrolled in Medicare Part D. For more information, contact your Milliman consultant.
Qualifications
Guidelines issued by the American Academy of Actuaries require actuaries to include their professional qualifications in all actuarial communications. The authors are members of the American Academy of Actuaries and meet the qualification standards for rendering the actuarial opinions contained herein.
1 Specialty is defined as exceeding the CMS specialty threshold of $950 per 30-day supply.
2 Top classes based on gross Part D per member per month (PMPM) costs.
3 See the full text of the CMS CY2023 Final Rule at https://www.federalregister.gov/d/2022-09375.
4 See Part D trend insights: Initial snapshot of 2024 trends through Q3 at https://www.milliman.com/en/insight/part-d-trend-insights-snapshot-2024-q3.