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Increases in Reimbursement for Brand-Name Drugs in Part D

WHY WE DID THIS STUDY

Recent increases in prescription drug prices have drawn the attention of Congress, made headlines in major media outlets, and raised concerns in Government agencies that reimburse for these drugs. Some studies also have shown that certain therapeutic classes of drugs-i.e., groups of drugs that treat specific conditions such as diabetes and heart disease-are becoming more expensive. Drugs in these therapeutic classes are typically maintenance drugs, which means they are usually prescribed for chronic conditions. Therefore, increasing costs for these drugs may have a long-term financial impact on Part D and its beneficiaries.

HOW WE DID THIS STUDY

This data brief examines how increases in reimbursement for brand name drugs in Part D may be affecting Medicare and its beneficiaries. We used prescription drug event records, i.e., prescriptions, to provide an analysis of reimbursement amounts and utilization changes for brand name drugs in Part D from 2011 to 2015. We also examined the impact of manufacturer rebates on total Part D reimbursement across the 5 years. We compared the annual rate of inflation to changes in Part D unit costs for individual drugs with reimbursement in 2 consecutive years. To control for the possibility that (1) increases in utilization or (2) newer, more expensive brand name drugs may have driven increases in total Part D reimbursement, we analyzed the number of prescriptions and average unit costs for brand name drugs that were reimbursed by Part D in every year from 2011 to 2015. Finally, we evaluated beneficiary out of pocket costs for brand name drugs in Part D from 2011 to 2015.

WHAT WE FOUND

  • Total reimbursement for all brand name drugs in Part D increased 77 percent from 2011 to 2015, despite a 17 percent decrease in the number of prescriptions for these drugs.
  • After accounting for manufacturer rebates, reimbursement for brand name drugs in Part D still increased 62 percent from 2011 to 2015.
  • Part D unit costs for brand name drugs rose nearly 6 times faster than inflation from 2011 to 2015.
  • The percentage of beneficiaries responsible for out of pocket costs of at least $2,000 per year for brand name drugs nearly doubled across the 5-year span.

WHAT WE CONCLUDE

Our findings show that although there were fewer prescriptions for brand name drugs in 2015 than in 2011, increases in Part D unit costs for brand name drugs led to greater overall Medicare Part D spending and higher beneficiary out of pocket costs for these drugs. Generally, plan sponsors base their reimbursement amounts on the prices that manufacturers set for their drugs. Therefore, increasing manufacturer prices for brand-name drugs may result in increasing costs for Medicare and its beneficiaries, especially those beneficiaries who need access to expensive maintenance drugs.

Copies can also be obtained by contacting the Office of Public Affairs at Public.Affairs@oig.hhs.gov.

Download the complete report.

Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201