- A new Congressional Budget Office report finds that net spending on specialty drugs to treat chronic, complex and rare conditions in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015. In Medicaid that spend doubled from $4.8 to $9.9 billion over the same period.
- In 2015, brand-name specialty drugs accounted for only 1% of all prescriptions dispensed in both Medicare Part D and Medicaid. However, they accounted for roughly 30% of net spend on prescription drugs.
- Both programs are large purchasers of prescription drugs, meaning price growth could have big implications for the federal budget, CBO said — and costs are expected to continue to swell.
Specialty drugs typically treat complex conditions and include orphan drugs, biologics and drugs that treat cancer, multiple sclerosis and HIV. In 2017, some 80% of FDA approved drugs would be classified as specialty, CBO said.
The period studied includes debut of many particularly pricey specialty drugs. For example, the hepatitis C drug Sovaldi is said to effectively cure the liver infection, albeit coming with a list price of $84,000 per treatment. Other treatments approved during the time include those for HIV and multiple myeloma.
With these higher prices, specialty drugs have also consumed a greater share of payer reimbursement, but that growth clearly hasn't been stable across the two payers CBO analyzed.
The net prices paid for brand-name specialty drugs are much higher in Medicare Part D than in Medicaid, mostly attributable to the higher rebates in Medicaid than in Medicare Part D.
Medicare Part D and Medicaid determine the prices of specialty drugs very differently. The Medicare Part D drug benefit is administered mainly by private payers, so the cost of drugs is subject to negotiations between the plans and providers, such as pharmacies and drug manufacturers.
Part D plans lower drug costs in part through rebate payments, a practice that's come under public and government scrutiny in recent months.
Earlier this year, the Trump administration proposed ending federal PBM rebates altogether and the pharmaceutical industry has pushed hard to refocus the spotlight on PBMs as a culprit for high drug prices.
Five major PBMs and payers were invited to speak to the Senate Finance Committee on April 9 to discuss rebates. Four out of the five are currently slated to attend.
In Medicaid, beneficiaries can get drug benefits either through fee-for-service or managed care plans, both subject to substantial rebates.
In its analysis, CBO also found the average net price for a 30-day supply of 50 top-selling branded specialty drugs was $3,600 in Medicare Part D and just $1,920 in Medicaid.
Over the time period, specialty drugs accounted for a larger share of total net drug spend in both programs, from 13% to 31% in Medicare Part D and from 25% to 35% in Medicaid.
However, so far these sharply climbing costs haven't reached a tipping point, CBO said, partly due to the fact that prices for many routine prescription drugs have declined about 4% a year from 2010 to 2015 because of expiring patents and cheaper generic alternatives.