Use of rebates and other discounts makes understanding what’s really happening to U.S. prescription drug spending complicated.
The Medicare Part D prescription drug program’s “gross spending” on drugs increased 20% between 2014 and 2016, to $145 billion, according to a report released earlier this week by the U.S. Government Accountability Office (GAO).
But net drug program spending on drugs increased just 13%, to $116 billion.
The big gap between the gross spending and the net spending was due to the manufacturers’ rebates and other price concessions, GAO officials say.
The price concession total soared 66% between 2014 and 2016, to $29 billion.
Price concessions amounted to 20% of gross spending in 2016, up from 14% in 2014.
GAO analysts included a figure illustrating what happened to use of Medicare Part D program price concessions in a look at use of pharmacy benefit managers to efforts to manage drug expenditures in the Medicare Part D program.
Medicare Part D Basics
The original Medicare program provided no coverage for prescription drugs.
Congress included the provision that created the program in the Medicare Modernization Act of 2003. The Part D program began providing drug coverage in 2016.
The program gives private insurers a mechanism for providing subsidized coverage through a system that, in many ways, is similar to the Affordable Care Act public exchange system for major medical coverage. The big difference is that managers of the Medicare Part D program have depended on insurers, brokers and agents to sell the Medicare drug coverage, rather than focusing on selling coverage through centralized, government-run websites.
About 46 million people now have Medicare drug coverage through Medicare Advantage plans with drug benefits, or through stand-alone Medicare prescription drug insurance policies, according to the Centers for Medicare and Medicaid Services.