Who’s to blame for rising Medicare Part D costs?
Thursday, September 15, 2016
Medicare Part D was established as a voluntary outpatient prescription drug benefit from The Medicare Modernization Act. The law was passed in 2003, and Medicare Part D went into effect in 2006.
The purpose of this plan was to ensure that individuals who are on Medicare — including those who are 65 years of age and older as well as those under 65 years with permanent disabilities — can have subsidized access to Medicare drug benefits.
Recently, there have been concerns related to Medicare's spending on high-cost "catastrophic" drugs, which has increased by 85 percent in just two years. Medicare catastrophic drug spending went from $27.7 billion in 2013 to $51.3 billion in 2015.
Express Scripts, which handles the prescription claims of millions of Medicare beneficiaries, showed that total drug spending increased by 2.6 percent in 2013, and a year later it went up by 13.8 percent. This significant increase was largely attributed to the release of the high-cost medications to treat hepatitis C. In 2015, the combined cost of Harvoni and Solvadi accounted for about $7.5 billion (14.6 percent) of Medicare's catastrophic drug costs.
As a result of these increasing drug costs, concerns have arisen over the vulnerability of the prescription drug benefits plans to pharmaceutical companies. The companies say the spending on specific brand and specialty drugs can be blamed for the increased drug spending that is being observed.
However, as generic drug prices in Medicare Part D fell 59 percent from 2010 to 2015, "more than 300 of the 1,441 established generic drugs analyzed had at least one extraordinary price increase of 100 percent or more between first quarter 2010 and first quarter 2015," according to a new Government Accountability Office report. This shows "extraordinary" price increases are not just coming from brand and specialty drugs.
Still, with brand and specialty drugs being covered under Medicare's catastrophic protection, costs will continue to increase unless more direct and practical pricing are attached to these drugs. The spending for brand drugs in 2015 was noted to be $52 billion, which was the cost that was projected for the next 20 years. Given that current spending is far exceeding projection for the future, steps must be taken to curtail future growth in drug spending.
The goal of the Medicare drug benefit was to help beneficiaries to reduce their out-of-pocket drug spending — which is critical for those with low-to-modest income — for catastrophic drug costs. If the pattern continues where the majority of Medicare spending is being attributed to catastrophic drugs and highly priced brand and specialty drugs, the benefits of the program may no longer be able to be reaped.
The Centers for Medicare and Medicaid Services (CMS) may be poised for future challenges as the annual rate of growth in Part D is expected to rise more than 5.7 percent between 2014 and 2024. Ongoing monitoring of the Part D plan marketplace will help CMS better understand how well Part D is working and how well it is meeting the needs of the people it serves.
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