- A new Congressional Budget Office report finds that net spending on specialty drugs to treat chronic, complex and rare conditions in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015. In Medicaid that spend doubled from $4.8 to $9.9 billion over the same period.
- In 2015, brand-name specialty drugs accounted for only 1% of all prescriptions dispensed in both Medicare Part D and Medicaid. Those prescriptions, however, represented roughly 30% of net spending on prescription drugs in those programs.
- Both programs are large purchasers of prescription drugs, meaning price growth could have big implications for the federal budget, CBO said, and costs are expected to swell.
Specialty drugs typically treat complex conditions and include orphan drugs, biologics and drugs that treat cancer, multiple sclerosis and HIV. In 2017, some 80% of FDA approved drugs would be classified as specialty, CBO said.
Many now widely used specialty drugs reached markets in the U.S. during that period studied. The hepatitis C drug Sovaldi (sofosbuvir), for example, was approved in 2014 and quickly became a multi-billion dollar blockbuster as an essential "cure" for the liver infection. It came at a steep cost however, listing for $84,000 per course of treatment.
Also approved during that time were new oral anticoagulants like Xarelto (rivaroxaban), as well as HIV medicines and drugs for multiple myeloma.
With higher prices, specialty drugs have also consumed a greater share of payer reimbursement. But that growth clearly hasn't been stable across the two payers CBO analyzed.
The net prices paid for brand-name specialty drugs are much higher in Medicare Part D than in Medicaid, mostly due to the higher rebates paid in Medicaid than in Medicare Part D.
Medicare Part D and Medicaid determine the prices of specialty drugs very differently. The Medicare Part D drug benefit is administered mainly by private payers, so the cost of drugs is subject to negotiations between the plans and providers, such as pharmacies and drug manufacturers.
Part D plans lower drug costs in part through rebate payments, a practice that's come under public and government scrutiny in recent months.
Earlier this year, the Trump administration proposed recasting how PBM rebates are used in federal health programs. Five major PBMs and payers were invited to speak to the Senate Finance Committee on April 9 to discuss rebates. Four out of the five are currently slated to attend.
In Medicaid, by contrast, beneficiaries can get drug benefits either through fee-for-service or managed care plans. By statute, drugmakers must offer a set rebate to Medicaid that can rise to match discounts given in commercial plans.
In its analysis, CBO also found the average net price for a 30-day supply of 50 top-selling branded specialty drugs was $3,600 in Medicare Part D and just $1,920 in Medicaid.
However, these sharply climbing costs haven't yet reached a tipping point, CBO said, partly due to the fact that prices for many routine prescription drugs have declined about 4% a year from 2010 to 2015 because of expiring patents and cheaper generic alternatives.