Medicare Part D drug spending spikes by 77%

Despite a decrease in the number of prescriptions for brand-name drugs going down, Part D spending and out-of-pocket costs both spiked up from 2011 to 2015, according to a new report from the Office of the Inspector General.

The total reimbursement for all brand-name drugs in Part D rose by 77 percent from 2011 to 2015 even though there was a 17-percent drop in prescriptions for those drugs. Even after taking into account manufacturer rebates, reimbursement for Part D brand-name drugs still swelled by 62 percent during that time period, the report said.  

What's more, the number of beneficiaries shouldering at least $2000 in out-of-pocket costs per year nearly doubled across the five-year time span and unit costs for brand-name drugs rose nearly 6 times faster than inflation.  

This issue is one hospital and healthcare leaders should be monitoring closely, both for purposes of ensuring good outcomes and from an operational and financial standpoint. If patients are forced to choose between medication and food or utility bills, their compliance with care plans and medication regimes might be jeopardized, leading to readmissions, hospitalizations and even increased mortality. Also, the rise in beneficiaries shouldering $2000 or more a year in out-of-pocket costs is alarming, considering many seniors live on fixed incomes and cost can sometimes dictate compliance.

Additionally, for small, rural or struggling hospitals whose razor thin margins are already the source of angst for c-suiters, watching drug spend totals steadily rise could force painful decisions like opting to not modernize EHRs or update equipment.

"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," the OIG said.

The OIG said plan sponsors base pharmacy reimbursement amounts on the drug prices set by manufacturers, so rising prices may result in increased costs for Medicare and program beneficiaries, particularly those that rely on pricey maintenance medicines.

"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," OIG said.

The report looked at how increases in Part D brand-name drug reimbursement could be affecting Medicare and its beneficiaries. The OIG used prescription records to analyze reimbursement amounts and utilization changes for brand-name drugs in Part D from 2011 to 2015. They also looked at how manufacturer rebates impacted the numbers over the 5 years as well as inflation rate changes in Part D unit costs and evaluated out-of-pocket costs.

Medicare Part D usually covers a range of drugs including cardiovascular drugs, insulin, antibacterial drugs and certain vaccines.

Taking action on rising drug costs has long been a pledge of the Trump Administration. Back in May, President Trump promised sweeping action to lower drug prices saying middle men and others in the industry "won't be so rich anymore." He's asked drug companies to post prices in their ads. 

The Administration says it will direct the FDA to speed up approval for over-the-counter medicines and that it has other regulatory actions planned that will boost competition and negotiations, and will incentivize lowering list prices and out-of-pocket costs, according to previous comments from HHS Secretary Alex Azar

Azar has also said the administration will go after drug makers that try to stall the introduction of more generics to the marketplace.