A provision in Medicare Part D that precludes The Centers for Medicare and Medicaid Services from negotiating brand-name drug prices is proving costly. The provision, which was implemented in exchange for the support of Medicare Part D from the pharmaceutical industry, means that Medicare Part D pays higher prices for brand-name drugs than other Organization for Economic Co-operation and Development (OECD) countries and similar U.S. government programs.
According to a recent policy brief released by Carleton University in Ottawa, ON Canada, brand-name drugs cost Medicare Part D 198% of the median costs for the same brand-name drugs in 31 OECD countries. This estimate also includes the rebates that are often used by pharmaceutical companies to help relieve the financial burden on consumers of brand-name drug prices. Additionally, Medicare Part D pays significantly more for brand-name drugs than other comparable U.S. programs, such as Medicaid and the Veterans Benefit Administration (VBA). The brief estimates that Medicare Part D would save between $15.2B and $16B annually if it were able to pay the same price for brand-name drugs as Medicaid and the VBA.
While Medicare Part D alone represents 7% of the global pharmaceutical market, Medicare Part D beneficiaries pay double the amount that other OECD countries pay for the same drugs. The brief’s recommendations include reducing the price of brand-name drugs for Medicare Part D to at least the levels of Medicaid and the VBA, mandatory rebates on official prices, and mandatory generic substitution.