Inflation Reduction Act Spurs Widescale Formulary Changes

The Inflation Reduction Act expands the share of costs Medicare Advantage Prescription Drug (MAPD) plans and standalone Prescription Drug Plans (PDPs) will be expected to cover starting in 2025. Carriers are adjusting their formularies in response to this, as well as other mounting headwinds. Decisions around formulary design are a key factor in Part D plan success as they impact member cost sharing and utilization, access to therapies, manufacturer rebates, and member plan selection.

Our analysis of 2025 MAPD formulary strategies identified several emerging trends. Specifically, formularies for the large national carriers appear to have remained stable compared to those of many regional or mid-size carriers. Less than 5% of drugs for the three largest national MAPD insurers — Aetna, Humana, and UnitedHealthcare — were removed from the most commonly used formularies from 2024 to 2025. And upward of 85% of drugs for those companies will remain on the same tier, demonstrating a very modest level of volatility. However, since these drugs remaining on the same tier likely represent more frequently used therapies, the proportion of spending these drugs account for is likely higher.

While we have focused on the most frequently used formulary for each plan sponsor, national carriers often use one formulary across most of their MAPD book of business. Looking at general enrollment MAPD plans, for example, the same formulary is used for about 70% of Humana’s plans and 90% of Aetna’s plans, while UnitedHealthcare uses the same formulary for nearly every plan offering.

By comparison, regional or mid-size carriers appear to be making more significant adjustments to their formulary coverage. In most markets, at least one regional carrier removed 10% or more unique drug identifiers — RxCUIs — from their formulary. In some rare instances, there were carriers that removed close to half of the RxCUIs that were on their 2024 formulary. Some of these regional carriers also made their formulary leaner by reclassifying drugs to higher tiers. In many cases, upward of 10% of RxCUIs were shifted to a higher cost sharing tier for 2025.

But there are also examples of plans that will have many drugs moving to lower tiers. In some of these cases, nearly 30% of drugs will be available on a lower tier, though these shifts may be more reflective of a realignment of existing formularies across plans, as appears to be the case for Centene in many states, or acquisition of other blocks of business, such as Molina’s purchase of Central Health Medicare Plan in California.

Broadly speaking, each carrier had some mix of these changes with offsetting effects. Beyond utilization and cost management, there are other downstream impacts of formulary changes that must be considered:

• The Centers for Medicare and Medicaid Services (CMS) regulates the amount by which expected average Total Beneficiary Cost (TBC) is allowed to change year-over-year for MAPD plans. This includes member cost sharing and premiums across Part C and Part D. Formulary is a component of this assessment, so the impact on TBC of any changes in formulary must be considered. With the meaningful changes in Medicare Stars performance observed in recent years, which also impacts carrier TBC limits, this will continue to impact the strategies plans are able to deploy on formulary — underscoring the fact that 2025 is likely the first of a multi-year disruption cycle in MAPD.
• Star ratings are a critical measure for MAPD plans as they impact the Part C benchmarks and rebates plans receive from CMS. Formulary plays a role in Star ratings for a contract given the importance of medication adherence, prescription drug access, and overall member satisfaction measures. Plan sponsors must weigh the tradeoffs between formulary changes and any impact on these Star ratings.
• Carriers must also be cognizant of potential effects of formulary changes on enrollment and selection. Offering a formulary that covers drugs not available through other plans can lead to selection of higher cost members. Likewise, formulary coverage that is too lean can drive member disenrollment and increased formulary exception spend for existing members where the carrier is not receiving rebates for non-covered brand medications.

Overall, there was a high level of variation in how plans adjusted their formularies for 2025. This reflects different carrier strategies and objectives for 2025. Some regional carriers may have been attempting to align with national competitors to address risk selection dynamics and margin pressures. Other sub-scale carriers are still in growth mode and may not have been willing to risk the member disruption. Nonetheless, the 2025 market will look very different than 2024 – and this will undoubtedly affect both member plan selection and utilization as we move into the next plan year.

Volatility among standalone prescription drug plans

Standalone PDP carriers typically maintain separate formularies for their basic and enhanced plan offerings. Beyond that, separate enhanced formularies are often used when a carrier offers two enhanced products within the same geography. So, while we observed variability in formulary strategy across carriers in the PDP market, there can also be variability within some carriers’ own books of PDP business.

Overall, we observed there is more year-over-year volatility in the formularies for enhanced plans than for basic plans. For these enhanced offerings, changes in formulary strategies among the larger carriers are more pronounced than in the MAPD market, despite PDP formularies generally already being leaner.

Additionally, while the number of drugs removed from PDP formularies was similar to that for MAPD plans, we’ve observed there will be more shifting of drugs across tiers for 2025:

• UnitedHealthcare moved a considerable number of drugs on its enhanced plan offering to a lower tier, with few drugs moving to higher tiers. Most notably, Eliquis, one of the drugs selected by CMS for price negotiation for 2026, has been moved from the non-preferred brand to preferred brand tier. Furthermore, United added about twice as many new drugs to its formulary compared to other carriers.
• CVS Health, which terminated its enhanced plans and will only be offering basic plans for 2025, removed over 10% of drugs from its formulary and nearly 25% of drugs were shifted to a higher tier for 2025 – while also halting agent / broker commissions on new business for 2025 in some states. The elimination of the CVS enhanced plan offerings impacts about roughly 2 million current members.
• Humana and Cigna made more modest changes to their formularies, but both carriers have moved 4% to 5% of drugs to a higher tier.
• Wellcare moved several drugs on their current formulary to different tiers for 2025, both higher and lower. While this primarily impacts generic drugs, it includes some high-cost specialty drugs such as abiraterone, an oncology medication, that is being moved from the non-preferred brand tier to the specialty tier.
• We are seeing more wide-ranging changes among regional carriers with some enriching their formularies while others have moved many drugs to higher tiers or removed them from their formulary all together. Some of these movements may be in part geared toward better alignment with the market, risk selection, and/or rebate optimization versus specific changes in response to the benefit redesign.

The impact of GLP-1s and Humira biosimilars

Without a doubt, GLP-1s have been the most widely discussed class of drugs available in the market over the past few years. As these drugs continue to gain popularity in the public sphere, carriers have wrestled with how to cover them. Despite the high cost, the market has responded by expanding formulary access to these medications, though potentially with more restrictive utilization management criteria. In 2024, about 65% of general enrollment MAPD plans covered Mounjaro and about 25% covered Ozempic. Now, for 2025, those products will both be covered by over 97% of plans. That said, less than 2% of plans have added coverage of Wegovy, which had its indication expanded to treat cardiovascular conditions in addition to weight loss earlier in 2024. The PDP market has seen a smaller percentage of plans cover these drugs. A large unknown going into future years is whether CMS extends coverage of GLP-1s for obesity. The Biden administration issued a proposed rule in late November aiming to do just that, but the comment period closes after the Trump administration takes over. As of this writing, no comment has been made on if the Trump team would finalize the rule.

The availability of biosimilars for Humira has similarly been a central consideration of those in the Part D market. Carriers have been working to form a strategy around biosimilars and to consider the trade-offs between lower costs and lower rebates for those products relative to their reference drugs, as well as potential member impacts. While nearly every MAPD and PDP covered Humira in 2024, there will be clear shifts for 2025.

Nearly all MAPD plans currently cover Humira and about one-third cover at least one biosimilar. Coverage of Humira will decrease to 93% of MAPD plans and over 90% will cover at least one biosimilar. This may be driven at least in part by the lag in the TBC calculation which does not yet fully account for Humira biosimilars.

Meanwhile, only about 60% of PDPs will cover Humira in 2025, compared to 95% in 2024, and coverage of biosimilars will increase from 39% of plans to 85%. These plans are not subject to the same TBC considerations as Part D plans.

Humira and its biosimilars are covered almost exclusively on the specialty tier in 2024 and 2025 in both segments. The market will be closely watching how experience emerges for both these classes of drugs in 2025 as plans shape their strategy for the 2026 plan year.

Gearing up for what’s next

While the Part D market for 2025 is coming into greater focus, there is still the open question as to which carriers placed their bets on the right formulary strategies. The Annual Enrollment Period is now complete, and we will soon see the results in terms of member switching – but until we can analyze emerging experience in 2025, the question mark will remain. As 2026 bid season ramps up, plans will need to have not only a pulse on the market, but also how their member populations have evolved – and swiftly make necessary adaptations before formularies are finalized in the spring.