treat rare diseases or conditions—which we will refer to collectively as “orphan drugs”—in the Medicare population. This report does not address Medicare coverage and reimbursement of medical devices.

We focus on the Medicare population because the program covers approximately 15 percent of the U.S. population, including adults who have a disabling rare condition and who have Medicare coverage based on their qualification for Social Security Disability Insurance (SSDI). Furthermore, data on Medicare prescription drug coverage and reimbursement are more readily available than similar data from Medicaid and private plans—because Medicare is a public, federal program, the data are public and centrally collected.

There have been no comprehensive studies of Medicare PDP coverage and reimbursement of orphan drugs. In 2005, the National Organization for Rare Disorders (NORD) conducted a similar study that examined coverage of orphan drugs in 10 national Medicare Part D plans (NORD, 2006). This report extends the NORD report by including drugs approved since 2005 and by analyzing coverage of all Medicare prescription drug plans. Furthermore, this report goes beyond the NORD analysis, which only analyzed plan coverage, by also analyzing factors that may reduce access to covered drugs (i.e., formulary tier placement, utilization management).2

Medicare Beneficiaries

Medicare, which was created by the Social Security Act of 1965, is a federally administered health insurance program for people who are 65 years of age or older or who qualify for SSDI. There is typically a two-year waiting period before people who qualify for SSDI can receive Medicare benefits. Congress has waived that requirement for people with end-stage renal disease or Lou Gehrig’s disease.

As of January 2010, Medicare covers 46 million Americans, 17 percent of whom are under 65 years and are permanently disabled (KFF, 2010c). Almost half (47 percent) of Medicare beneficiaries have low income (below 200 percent poverty), and 7 million beneficiaries meet income and asset criteria to quality for Medicaid—these beneficiaries are known as “dual-eligibles.” Among the Medicare population, there is a high prevalence of comorbid conditions (44 percent suffer from three or more chronic conditions), and 29 percent have a cognitive or mental impairment (KFF, 2010c).

It is not known how many Medicare beneficiaries have a rare disease or, conversely, what proportion of people with a rare disease is covered by Medicare. However, the Social Security Compassionate Allowances program—


Although the NORD report notes the tier placement and utilization management tools used for each drug, the authors do not provide any analysis of these aspects of drug coverage.

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