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Transcript for audio podcast:
Increases in Reimbursement for Brand-Name Drugs in Part D

From the Office of Inspector General of Department of Health and Human Services


SHEILA DAVIS (SD): The cost of brand-name drugs in Medicare Part D is going up. That means increasing costs to Medicare, and higher out-of-pocket-costs for Medicare beneficiaries. I'm Sheila Davis, and welcome to the HHS-OIG's podcast.

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In the Medicare Part D program, Medicare partners with plan sponsors, like health insurance carriers, to offer prescription drug plans to beneficiaries with varying drug cost and coverage. Ed Burley, a Deputy Regional Inspector General for the Office of Evaluation and Inspections in Philadelphia, is joining me via phone to discuss our new data brief titled: Increases in Reimbursement for Brand-Name Drugs in Medicare Part D. Ed, let's start with the finding that even though there were fewer prescriptions for brand-name drugs in 2015 than in 2011, total reimbursement for all brand-name drugs still increased. Can you tell us why?

ED BURLEY (EB): Sure. We found that the increases in unit costs for brand name drugs were so large, that they outweighed the decreases in utilization. For nearly half of the drugs with reimbursement, in every year from 2011 to 2015, unit costs increased at least 50 percent. For example, we found that for one drug, unit costs increased over 2,000 percent from 2011 to 2015. We also looked at the 200 brand-name drugs with the most prescriptions in 2015 and found they had greater increases in unit costs than all drugs. In fact, the average unit costs for these 200 drugs increased at nearly double the rate of increase for all drugs, which indicates that prices increased faster for drugs taken by a lots of Medicare beneficiaries.

SD: This report also found that Part D unit costs for brand-name drugs increased nearly 6 times faster than the rate of inflation. What impact does this have on Medicare Part D and the beneficiary?

EB: Although we would expect drug prices to rise across the 5 year period, the extent of these increases is pretty significant, especially when compared to the rate of inflation. We also looked at benchmark prices for brand-name drugs in Part D, which are typically reflective of manufacturer prices. We found that Part D unit costs more closely followed the upward trend in these benchmark prices-rather than the rate of inflation, which actually slowed across the 5 year period we reviewed. This could mean that increasing manufacturer prices for brand-name drugs are resulting in higher Part D reimbursement for these drugs; in turn, overall costs to the government and Medicare beneficiaries will also increase.

SD: It's clear that drug prices have a direct impact on the beneficiary. This report found that from 2011-2015 the percentage of beneficiaries responsible for paying at least $2,000 in out of pocket costs for brand-name drugs doubled - from 3.7% to 7.3%. That's a lot of money, and a lot of beneficiaries.

EB: Yes. A lot of Part D beneficiaries are spending considerably more in out of pocket costs for brand name drugs. We also reviewed out of pocket costs for drugs with reimbursement in every year from 2011 to 2015. In other words, we looked at beneficiary costs for the same drugs across the five years, and found that beneficiaries paid an average of $161 in out of pocket costs in 2011, but spent an average of $225 for these drugs in 2015-an increase of 40 percent.

We also grouped drugs by the conditions they are used to treat, and we found that beneficiaries spent the most on drugs often prescribed for diabetes, high cholesterol, and certain respiratory conditions. Because these are typically chronic conditions, we expect that beneficiaries will need to continue to take these drugs to maintain their health. Therefore, we expect that increasing prices for these drugs will affect beneficiaries and the government for years to come.

SD: OIG didn't make recommendations in this data brief, but how can this information help ensure the integrity of the Part D program?

EB: While we don't include recommendations in this report, we are hoping that our findings will contribute to the national conversation about drug costs. We are committed to examining issues in prescription drug pricing and their costs to beneficiaries, and we will continue working with CMS to ensure the integrity of the Part D program.

SD: Ed Burley, from the Office of Evaluation and Inspections in Philadelphia, thank you for taking the time to talk with us.

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