Medicare Part B Drug Spending

While drug spending growth overall has ameliorated in recent years, certain subsectors continue to be a concern, primarily specialty pharmaceuticals, many of which are physician office-administered as injections or infusions.  Medicare has traditionally paid for these office-administered drugs under Part B and uses an Average Sales Price methodology for reimbursement.  The Government Accounting Office has issued a report which examines trends in this Part B drug spending.   (GAO Report)   Total spending on Part B drugs was $19.5 billion in 2010.   For the top 55 Part B drugs the GAO looked at data from 2008 through 2010 to ascertain utilization and spending growth.  These top 55 drugs account for $16.9 of the Part B spending or about 85%.  These drugs include those for treatment of anemia in renal disease, age-related macular degeneration, cancer and autoimmune diseases.

The number of beneficiaries receiving a Part B drug ranges from over 15 million getting a flu vaccine at about $13 each to only 660 receiving a hemophilia drug, at an annual cost of $217,000 per beneficiary.  For the 55 drugs on the list, Medicare accounted for at least half the total spending on the compound for 35 of them and over two-thirds on 17.  So Medicare should have substantial buyer leverage in regard to pricing on these drugs.  Yet the data shows that many of these Part B drugs have significant price increases to the agency over the study time period, 42 of the 55 had a price increase, with several having ten percent or greater increases.  The drugs used most in Medicare Part B tended to have significant price increases and utilization growth as well.  CMS has attempted to address some issues regarding Part B spending by bundling the drug costs into global payments, but obviously needs to take a more aggressive stance both on utilization appropriateness and pricing.