HHS Inspector General Documents Big Pharma’s Price Gouging of Seniors

According to a report issued in June by the U.S. Department of Health and Human Services Office of Inspector General (OIG), the overall costs paid by Medicare beneficiaries and the federal government for brand-name drugs under the Medicare Part D program skyrocketed from 2011 to 2015.[1] The primary drivers of these ever-escalating expenses were the rising prices charged by pharmaceutical companies.

For its report, the OIG examined records for all brand-name prescriptions that were reimbursed under Medicare Part D from 2011 to 2015. After accounting for rebates paid by drug companies, the OIG calculated total annual reimbursements paid by the government and out-of-pocket expenses — including deductibles, copayments and coinsurance — paid by Medicare beneficiaries. The OIG also compared trends in these payments to the overall rate of inflation.

Strikingly, the OIG found that despite a 17-percent decrease in the number of brand-name prescriptions filled under Medicare Part D, total annual Medicare Part D post-rebate reimbursements increased by 62 percent over five years, from $49 billion in 2011 to $80 billion in 2015.

Likewise, for brand-name drugs with reimbursement in all five years examined by the OIG, beneficiaries’ annual out-of-pocket expenses per brand-name drug increased 40 percent, from $161 in 2011 to $225 in 2015. In addition, the proportion of beneficiaries who paid at least $2,000 per year in out-of-pocket costs for brand-name drugs nearly doubled from 3.7 percent in 2011 to 7.3 percent in 2015. The three categories of drugs with the highest out-of-pocket expenses for Medicare Part D beneficiaries were brand-name insulins, cholesterol-lowering drugs and inhaled corticosteroids.

Unsurprisingly, the OIG found that the escalating costs of drugs covered by Medicare Part D far outpaced the rate of inflation as measured by the consumer price index (CPI): From 2011 to 2015, the average cost of brand-name drugs with Part D reimbursement in all five years increased 29 percent, which is nearly six times higher than the 5-percent increase in the CPI over the same period. In addition, the CPI increased between 0.1 percent and 2.1 percent each year from 2011 to 2015, whereas costs for brand-name drugs covered by Medicare Part D had median increases of 9 to 10 percent annually.

For many Medicare beneficiaries on fixed incomes, soaring prices have made prescription drugs unaffordable. As a result, seniors too often are forced to skip doses or avoid filling prescriptions for essential medications. These circumstances are unacceptable, and the first step to reining in soaring drug prices for seniors is for Congress to pass legislation that would allow Medicare to negotiate drug prices with pharmaceutical companies.

References

[1] Department of Health and Human Services Office of Inspector General. Increases in Reimbursement for Brand-Name Drugs in Part D. June 2018. https://oig.hhs.gov/oei/reports/oei-03-15-00080.pdf. Accessed August 18, 2018.