A federal law that limits the amount of money Medicare can recoup in drug rebates means the CMS is saving billions more on drugs for Medicaid beneficiaries than for those in Medicare's Part D prescription drug program, according to HHS' Office of Inspector General.
In a report comparing expenditures for 200 brand name drugs, the watchdog agency found that Medicare got $10.3 billion in rebates for $66.5 billion worth of drug payouts in 2012, a rebate rate of about 15.5%. Medicaid paid out $35.7 billion but received $16.7 billion in rebates, a rebate rate of about 47%.
Part of the reason for the significant difference is that the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 prohibits HHS from interfering in the negotiations between the private health plans that administer the Part D benefit or instituting a price structure for the reimbursement of covered drugs.
The OIG recommended that the CMS and Congress find a way to address the disparity. This is the second report the agency has issued documenting a substantial difference in rebates collected under the programs.
“While we recognize the statutory limitations surrounding rebate collection under Part D, we encourage (the CMS) and Congress to explore the costs and benefits of obtaining additional rebates under Part D,” the report says.
The CMS, however, said in a response to the OIG that there is little it can do to get more generous rebates under Part D.
After the report's release, Sen. Sherrod Brown (D-Ohio) introduced a bill that would give Medicare the ability to provide lower drug prices for low-income Medicare beneficiaries who are also eligible for Medicaid (known as dual-eligibles) and those who have a limited monthly income.
“For too long, pharmaceutical companies have been profiting off their ability to charge our most vulnerable Medicare beneficiaries higher prices for their drugs,” Brown said in a statement. “Medicare should have the same ability as the Medicaid program and private insurance companies to negotiate better prices for eligible beneficiaries.”