Preliminary CBO Analysis Finds Medicaid Doing Far Better than Medicare in Addressing Rising Cost of Specialty Drugs

Last week, I wrote about how data from the recent Medicare Trustees report show the highly effective Medicaid drug rebate program continues to produce substantially larger rebates from drug manufacturers than private insurers in Medicare Part D do.  Now, new preliminary data from an analysis conducted by the Congressional Budget Office similarly finds that Medicaid is doing a far better job than Medicare Part D in addressing the rising cost of “specialty” drugs.

According to CBO, using a definition developed by IMS Health (now IQVIA), specialty drugs are high-cost drugs (costs of at least $6,000 in 2015) which treat a complex, chronic or rare condition and have certain characteristics such as being initiated or maintained by a specialist, being subject to special handling in the supply chain and requiring monitoring or counseling, among others.  Specialty drugs accounted for about one-third of net prescription drug spending in both Medicaid and Medicare in 2015.

CBO analyzed the 50 top-selling brand-name specialty drugs in Medicare Part D in 2015 and had the following preliminary results comparing Medicare Part D and Medicaid:

  • Medicaid rebates for these specialty drugs in 2015 were more than three times larger than in Medicare Part D.  The weighted average rebate was $2,410 in Medicaid, compared to $780 in Medicare Part D.
  • The weighted average price per specialty drug prescription, net of rebates, in Medicare Part D in 2015 was nearly 1.9 times higher than in Medicaid.  The weighted average net price was $3,600 in Medicare (with rebates reducing the cost by nearly 18 percent) compared to $1,920 in Medicaid (with rebates reducing the cost by nearly 56 percent).
  • Between 2010 and 2015, the average net price per prescription for specialty drugs in Medicare Part D grew 22 percent on average, compared to 13 percent in Medicaid.  
  • Between 2010 and 2015, total net spending on specialty drugs increased annually by an average of 31 percent in Medicare Part D. nearly twice the average annual increase of 16 percent in Medicaid.

While the preliminary CBO data is further evidence of the success of the Medicaid drug rebate program in helping reduce state Medicaid programs’ prescription drug costs, the rebate program is nonetheless facing growing criticism and significant efforts to weaken or undermine it.  For example, the Trump Administration’s drug pricing blueprint misleadingly blames the Medicaid drug rebate program, in part, for rising prices overall and higher out-of-pocket costs for consumers in the private insurance market.  And as I’ve previously written, the Administration has proposed to allow up to 5 states to opt out of the rebate program entirely which raises serious concerns including the risk of higher state Medicaid drug costs and sharply reduced access to needed medications among low-income beneficiaries.