5 Things to Know About the CMS Part D Data Release

Allyson Funk
Allyson Funk May 1, 2015

5 Things to Know About the CMS Part D Data Release.

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1. Part D’s competitive, market-based structure is unique among government programs.

  • As required by law, Part D is different than other parts of Medicare and other government programs because it relies on competition among private plans that submit bids to offer prescription drug benefits to enrollees.
  • Competition and rebates have been significant in keeping Part D costs $349 billion lower than initial ten-year projections and keeping costs and premiums low for beneficiaries.

2. Release does not reflect actual government spending on the Part D program in 2013.

  • According to the Congressional Budget Office (CBO), actual Part D mandatory outlays were $62 billion in 2013, only about 10.6 percent of total Medicare spending that year.

3. Significant rebates are negotiated in Part D making the actual cost of drugs lower than reported in yesterday’s data.tn_MedMon

  • The data released do not reflect the significant rebates and discounts Part D plans negotiate with pharmaceutical companies.
  • The Medicare Trustees report “many brand-name prescription drugs carry substantial rebates, often as much as 20-30 percent.” They also report, on average, across all program spending, rebate levels have increased in each year of the program.
  • In fact, actual rebates are above projected levels for each year of the program.
  • The drug CMS lists as #1 on its list of top 10 drugs by cost in 2013 is actually one of the most highly rebated drugs, with rebates reportedly in excess of 60 percent.

 4. The list is already outdated and ignores generic competition.

  • CMS’ list of top-10 drugs by cost does not reflect that competition and incentives to control costs have led to high generic utilization in Part D.
  • Publicly-available reports suggest more than half of the medicines on the list are currently off patent or are expected to lose patent protection by 2016.
  • Innovator companies invest in pioneering research to bring new treatments to patients, and over time those medicines become available as lower-cost generic copies.
  • Since Part D’s inception generic utilization among seniors has increased from about 54 percent in 2005 to 84 percent in 2013.

5. Use of medicines reduces other medical spending.

  • In 2012, CBO announced a change to their cost-estimating methodology to reflect evidence that increases in prescription drug use lead to reductions in spending for medical services.
  • Enrollment in Part D improved access to medications recommended to treat congestive heart failure (CHF) for beneficiaries with limited or no prior drug coverage. An increase in drug adherence for Part D enrollees with congestive heart failure led to over $2.3 billion in annual savings to Medicare, driven by reductions in Parts A and B expenditures. Over the next 10 years, further improvement in adherence among Part D enrollees with CHF could yield an additional $22.4 billion in federal savings.

Topics: Part D, Medicare