The Department of Health and Human Services Office of the Inspector General (OIG) just released a report revealing a steep increase in out-of-pocket costs for people with Medicare Part D prescription drug coverage needing brand-name drugs. The findings are particularly disturbing given that people with Medicare filled fewer brand-name prescriptions and still spent more. The OIG blames pharmaceutical companies for increasing their prices on these drugs substantially.
During the five-year period between 2011 and 2015, the OIG found that people with Medicare filled 17 percent fewer prescriptions than in the prior period. But, their out-of-pocket costs for these drugs rose 40 percent, from $161 to $225. Part D drug plans simply shifted more costs for brand-name diabetes, cholesterol and asthma drugs, among others, onto their enrollees because pharmaceutical companies charged them significantly more for these drugs.
Taxpayers were also hit hard by the steep increase in the prices pharmaceutical companies charged Medicare Part D plans for their drugs. The brand-drug price increases amounted to a 77 percent increase in Part D reimbursements to pharmaceutical companies, up to $102 billion in 2015 from $58 billion in 2011.
Not surprisingly, in 2015, 7.3 percent of people with Medicare in a Part D plan spent $2,000 per year in out-of-pocket costs for brand-name drugs, almost twice the 3.7 percent in 2011. Until Congress steps in to negotiate drug prices, as every other nation does, you should expect this trend to continue.
The unit price increase for covered Medicare Part D brand-name drugs averaged 29 percent, nearly six times more than inflation, which was 5 percent. And, some drugs saw far greater price increases. The price of Valeant’s rheumatoid arthritis drug, Cuprimine (250 milligram oral capsule), increased 2,143 percent, from $6 in 2011 to $135 in 2015. How could this and other extreme price increases be? Because Valeant and every other brand-name drug manufacturer can raise the price of their drugs as much as they want with little effect on demand.
Had we been in the room with the Valeant people deciding to raise Cuprimine’s price, we might have heard them debating how far they should push the price increase. “Let’s raise the price to $270. We still can get the PBMs to put it on the insurers’ formularies, if we pay the PBMs a generous fee,” one of them might have suggested. “But, our manufacturing and marketing costs aren’t up. Cuprimine is only costing us pennies to produce,” another might have replied. “OK. We’ll split the difference. That seems entirely reasonable. And, we can raise the price again next year. Congress hasn’t stopped us yet.” Sadly, Congress seems not to care. This is what our lawmakers understand to be pricing in a competitive free market.
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