Medicare Monday: New research finds drugs not a key driver of Medicare Part B costs

Kelsey Lang
Kelsey Lang October 26, 2015

Medicare Monday: New research finds drugs not a key driver of Medicare Part B costs.

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Over the last several weeks, Medicare Monday has talked about services covered by Medicare Part B and average sales price (ASP), the method for reimbursing drugs covered by Part B.  In particular, we’ve highlighted that ASP is an effective pricing mechanism that leverages the power of the market to save Medicare and beneficiaries money and that the share of Part B spending on medicines has been stable over time.

New research by the Moran Company further examines trends in ASP for Medicare Part B drugs over the 2006 to 2014 period. The study concludes that the volume-weighted ASP for all Part B drugs has remained steady year over year, suggesting that prescription drugs and biologicals are not a key driver of Part B program costs.  In fact, price growth for Medicare Part B drugs is below overall medical inflation. The findings reflect that the cost of prescription medicines covered by Medicare Part B is influenced by broader competitive market forces, such as competition among products in the same therapeutic class and entry of generic drugs into the market.   

mm102515Given recent attention to the cost of cancer drugs, which represent 6 of the top 10 therapies covered under Part B, Moran also examined trends in ASP for oncology drugs.  While volume weighted ASP of oncology drugs is higher than that of non-oncology drugs, volume weighted ASP for these products remains in line with overall medical inflation.

Looking behind the headlines to see what is actually driving health care costs is important (Check out our recent discussion of MedPAC’s analysis of Medicare drug costs here, here and here).  Learn more at PhRMA.org/Cost and check back with us on Medicare Monday.

Topics: Drug Cost, Medicare, Medicare Monday, Part B