Medicare drug pricing debate heats up

A senator is investigating whether Medicare's prescription drug benefit is vulnerable to manipulation by pharmaceutical companies after an exclusive Associated Press report showed that Medicare’s spending on certain drugs soared by 85%.

The AP report said that Medicare’s spending on high-cost “catastrophic” protection drugs jumped from $27.7 billion in 2013 to $51.3 billion in 2015. The data includes costs to taxpayers, insurers and beneficiaries, as compiled by Medicare's Office of the Actuary.

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The soaring costs were led by hepatitis C drugs Harvoni and Sovaldi (Gilead Sciences). The two drug accounted for nearly $7.5 billion of Medicare’s catastrophic drug costs in 2015, up from around $3.5 billion in 2014. Other drugs that skyrocketed in price included Gleevec (Novartis) for leukemia and Revlimid (Celgene) for cancer.

Immediately following the report, Sen. Charles Grassley (R-Iowa) asked whether Medicare’s prescription program is being handled correctly in a letter to the agency. "Do you believe there is potential for exploitation of the catastrophic benefit as it is currently framed?" Grassley asked.

Plus, the Congressional Medicare Payment Advisory Commission recently warned that spending on the prescription program is rising at an "unsustainable" rate, singling out specialty drugs covered under Medicare's catastrophic protection.

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However, pharmaceutical manufacturers and other organizations do not believe the problem is as bad as represented by AP.  “It focused only on 2014 to 2015 drug spending, which increased by 15%, and overlooked historical and projected changes in drug costs,” said Robert Goldberg, PhD, medical economist and vice president and co-founder of Center for Medicine in the Public Interest.

Goldberg

“Context matters. Part D spending grew by 15% in 2015 and is expected to grow annually, on average, by 10.9% between 2015 and 2020. And from 2010 to 2013, gross drug spending-not including rebates and other expenses-grew 10.1%,” Goldberg added.

AP also failed to note the percentage of “pricey” new drugs in total Medicare spending, according to Goldberg. “Spending on brand drugs for 2015 was $52 billion, around 8% of total Medicare spending, which is about what it is projected to be for the next 20 years."

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