Drug rebates do not reduce costs for Medicare patients

Health care insurers that provide Medicare Part D prescription drug coverage received $48.6 billion in rebates from drug manufacturers in 2021, according to a recent report from the U.S. Government Accountability Office (GAO). But the GAO found that rebates did not reduce individual beneficiaries’ costs for prescription drugs. The prices patients paid were based on the cost of the drug before rebates, while paid plans were the cost after rebates.

In total, beneficiaries paid $21 billion for the 100 drugs that received the largest rebates, while health plans paid $5.3 billion after rebates. In fact, Medicare patients paid more than health plans for 79 of the top 100 drugs.

Based on these findings, GAO recommends that the Centers for Medicare and Medicaid Services monitor drug rebates, saying this would not require CMS to intervene in negotiations between health plans and drug manufacturers. The GAO said the monitoring would provide insight into the impact of rebates on formularies and whether that would discourage enrollment for some patients.

However, the Department of Health and Human Services said monitoring the rebates is not necessary. HHS is already reviewing health plan formulas to ensure they do not discourage enrollment. The design of future benefits may change due to the new Medicare drug price negotiation program under the Inflation Reduction Act, the Department of Health and Human Services said in its response to the GAO report.

The GAO has been asked by U.S. Senators Amy Klobuchar (D-Minn.) and Richard Blumenthal (D-Connecticut), as well as House Minority Leader Hakeem Jeffries (D-N.Y.), to examine rebates in the Part” program. d” and evaluate the implications thereof. Health plans and beneficiaries. The Government Accountability Office analyzed data on drug rebates in 2021, which is the most recent data available.

The GAO analysis found that drug manufacturers paid health plans $48.6 billion in rebates, or 23% of total Part D spending of $210.6 billion. The analysis found that three drug classes accounted for 73% of rebates: endocrine metabolic agents, including antidiabetic drugs; Blood thinners, including anti-stroke drugs; and respiratory agents, including anti-asthma medications. Of the $48.6 billion in rebates, 84.2% are for just 100 drugs, representing 1.3% of all Part D covered drugs.

As part of this analysis, GAO spoke with CMS officials, plan sponsors, and manufacturers. Health plans and manufacturers have said the goal of the rebates is to get drugs at the lowest net cost as a way to lower insurance premiums. Health plans more often placed these discounted drugs in their formularies with preferred placement, the GAO found, and generics for 40 of the discounted drugs were less likely to be given preferred placement.

The GAO analysis also found that the amounts paid by Medicare beneficiaries were based on the total cost of the drug before the deductible. For 79 of the top 100 Part D deductible drugs, beneficiaries spent $21.0 billion, and health plans spent $41.9 billion. But after the cuts, health plans spent $5.3 billion.

The higher spending also affects the overall Medicare program, because Medicare “is responsible for a significant portion of cost sharing with beneficiaries receiving Low-Income Support Assistance,” the GAO noted in its conclusion.