Skip to main content

Analysis

HHS OIG: Medicare Part D Drug Rebates 'Substantially' Reduced Spending Growth

By Jack O'Brien  
   September 13, 2019

Between 2011 and 2015, rebates for brand-name prescription drugs still increased $2 billion.

Total rebates for brand-name prescription drugs in Medicare Part D nearly doubled between 2011 and 2015, according to a Department of Health and Human Services (HHS) Office of Inspector General (OIG) report released Friday.

The report analyzed more than 1,500 brand-name prescription drugs over a five-year span, finding that 42% of reviewed drugs had unit rebate decreases. During the study, total rebates for brand-name prescription drugs in Part D rose from $9 billion to $17 billion. 

Unit reimbursements increased for nearly all prescription drugs, but 39% of drugs reviewed by the agency had reimbursement increases coupled with rebate decreases. HHS OIG also noted that the study focused on brand-name drugs with rebates in every year during the study, which ultimately excluded 45% of Part D drugs. 

Despite rebates 'substantially' reducing the growth of overall Part D spending, OIG concluded that Medicare still spent $2 billion more for brand-name drugs with rebates in 2015 compared to 2011. 

Additionally, a small portion of brand-name prescription drugs reviewed in the report had an outsized impact on rebates, with 60% of Part D rebate increases coming from 10% of brand-name drugs. 

Rising prescription drug prices has been a focal issue for the healthcare industry, with a Fitch Solutions report estimating pharmaceutical spending will increase by 2.5% in 2019, topping $370 billion. 

Related: HHS OIG Offers 25 Ways to Reduce Healthcare Waste and Fraud

The release of the OIG report came same week Congress returned from its August recess, with lawmakers considering several pending pieces of legislation aimed at curbing high prescription drug prices. 

Earlier this week, The New York Times reported on a draft plan to lower prescription drug prices crafted by House Speaker Nancy Pelosi, D-Calif., though it did not appear to include language addressing Part D drug rebates.

The Senate Finance Committee passed its own drug pricing plan in July, but not before removing a proposal to penalize drugmakers who raise prices above inflation.

A few months ago, the Trump administration scrapped its bold proposal to eliminate rebates for pharmacy benefit managers (PBM) negotiating with drug manufacturers.

Despite strong backing from HHS Secretary Alex Azar and inclusion in President Donald Trump's prescription drug pricing blueprint, the plan was withdrawn in July. The PBM lobby previously derided the proposal as "poorly conceived."

Related: R.I.P. Rebate Rule: Centerpiece Plucked From Trump's Drug Pricing Blueprint

Reacting to the HHS OIG report, Lauren Aronson, executive director of the Campaign for Sustainable Rx Pricing Growth, stated that it was further evidence that drugmakers are "the culprit for the crisis of rising prescription drug prices."

"Big Pharma can no longer hide behind its scapegoating of PBMs and must be held accountable for its egregious pricing practices," Aronson said in a statement. "This report should help policymakers see clearly through Big Pharma’s blame game and press forward with bipartisan, market-based solutions to crack down on the anti-competitive tactics and price-gouging of brand name drug makers."

Matt Eyles, CEO of America's Health Insurance Plans (AHIP), said that the report "repudiates one of Big Pharma’s biggest myths" that insurers negotiating savings results in higher drug prices.

"Nearly 46 million Americans receive their prescription drug coverage through Medicare Part D because it offers value and choice," Eyles said in a statement. "As patients' bargaining power, we will continue to deliver on that promise and ensure every American has access to the prescription drugs they need at a cost they can afford."

Related: HHS Inspector General Daniel Levinson Resigns

Editor's note: This article has been updated to include a comment from America's Health Insurance Plans.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: The homepage of the official website for the United States Department of Health and Human Services. (Editorial credit: chrisdorney / Shutterstock.com)


Get the latest on healthcare leadership in your inbox.