Medicare Part D spending rose despite prescriptions going down, watchdog says

The government and patients shoulder escalating costs for brand-name drug spending within Medicare Part D even though use of these drugs is declining, according to a watchdog report released Monday.

HHS' Office of Inspector General found the agency spent more than $380 billion on brand-name drugs between 2011 and 2015, a 77% increase. The government's costs spiked by 62% even though manufacturers have more than doubled the amount of rebates they offer for these drugs, according to HHS' OIG.

The CMS works through middlemen companies known as plan sponsors to negotiate Medicare Part D prices with drugmakers.

The 20 brand-name drugs with the highest cost spikes were medications with little to no alternative treatments, according to OIG's data. Those drugs included brand-name antibiotics, several of which had price hikes of more than 1,000%. The major outlier was in the dialysis drug Dianeal, which spiked more than 200,000%.

The prices of the most-used drugs increased almost twice as much as all other brand-name drugs reviewed for the study. The 200 drugs most prescribed in 2015 represented about 85% of prescriptions and 71% of the government's total Part D spend.

The findings come as the Trump administration launches a major drug pricing initiative seeking to cut the costs of Part B drugs by moving them into a Part D model. But the report shows that Part D has its own problems.

"What this report illustrates is that Part D itself needs to be heavily scrutinized," said Dr. Kavita Patel, a former Obama administration official and current fellow at the Brookings Institution. "Is B to D actually going to do what people think it's going to do?"

The OIG data showed government drug spending is tied to individual drug price increases rather than the number of people getting prescriptions. The percentage of Part D enrollees who found themselves on the hook for at least $2,000 in out-of-pocket costs for brand-name drugs also nearly doubled, although the number of total prescriptions decreased by 17%.

The OIG cited a 2017 study from the Medicare Payment Advisory Commission (MedPAC) that found higher-priced new drugs entering the market leads directly to higher government spending because the patients using those drugs are more likely to hit their catastrophic coverage limits when the government starts paying for a higher share of their drug costs.

A parallel OIG study from the same year found that the government's spending for catastrophic coverage tripled from $10.8 billion in 2010 to $33.2 billion in 2015. Ten high-priced drugs, costing up to $34,000 per month, represented nearly one-third of all the government's spending on catastrophic coverage.

Costs have risen for Part D enrollees as well. Out-of-pocket spending for Part D drugs by beneficiaries who don't get third-party help with accounted for about $29 billion, including co-pays. More patients are reaching the catastrophic coverage phase in Part D.

The study comes as Washington experts and industry are split over the impact of HHS Secretary Alex Azar's drug pricing strategy which focuses on the shift of Part B drugs into Part D.

Azar has framed the proposed policy as bolder than any previous administration's plan and "nothing short of a complete restructuring" of the industry.

But Patel said that Part D plans already do what they can to lower costs, and the OIG report shows the fundamental problems of cost for patient and government remain despite negotiations with drug makers, and that costs for the government in particular will continue to rise with the growth in subsidies.

"This will get worse, we know that from years past," Patel said.