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Rebates for Brand Name Drugs in Part D Substantially Reduced the Growth in Spending from 2011 to 2015

WHY WE DID THIS STUDY

In June 2018, OIG published a data brief Increases in Reimbursement for Brand-Name Drugs in Part D (OEI-03-15-00080). This data brief found that even after accounting for rebates, Part D reimbursement for brand-name drugs increased 62 percent from 2011 to 2015. Subsequently, OIG received a Congressional request to provide more information about brand name drugs with Part D reimbursement and rebates in every year from 2011 to 2015.

HOW WE DID THIS STUDY

In response to this Congressional request, OIG used prescription drug event data and direct and indirect remuneration data from the Centers for Medicare & Medicaid Services to examine the 1,510 brand-name drugs with Part D reimbursement and rebates in every year from 2011 to 2015. Specifically, we analyzed: (1) how total Part D reimbursement compared to rebate adjusted reimbursement from 2011 to 2015; (2) how the size of the rebates changed over the 5 years; and (3) whether rebates grew in tandem with reimbursement across the 5 years (i.e., did rebates increase or decrease at the same level as reimbursement).

WHAT WE FOUND

Although total reimbursement grew much more than rebate adjusted reimbursement for brand name drugs in Part D, rebate adjusted reimbursement for these drugs still increased by $2 billion from 2011 to 2015. Total rebates for brand name drugs in Part D nearly doubled across the 5 years reviewed; however, 42 percent of these brand name drugs reviewed had decreases in unit rebates. Further, rebates did not always increase when unit reimbursement increased for brand-name drugs across the 5 years reviewed. In fact, although unit reimbursement increased for nearly all drugs, rebates declined as unit reimbursement grew for 39 percent of drugs reviewed.

WHAT WE CONCLUDE

Overall, we found that increases in rebates substantially reduced the percentage increase in reimbursement for brand-name drugs in Part D from 2011 to 2015. However, at a drug-by-drug level, unit rebates did not always increase as unit reimbursement increased for brand name drugs reviewed. Although rebates substantially reduced the growth of total Part D spending, they did not prevent increased overall Part D spending for brand-name drugs from 2011 to 2015, as Medicare still spent $2 billion more for brand-name drugs with rebates in 2015 than in 2011.