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November 16, 2016

What Medicare and Medicaid spent on Rx drugs in 2015

Daily Briefing

    CMS on Tuesday updated its Drug Spending Dashboard, which for the first time included data on Medicaid prescription drug spending.

    In addition to showing how much Medicare and Medicaid spent on prescription drugs in 2015, the data also show which drugs experienced the largest price increases last year. The prices do not reflect rebates Medicaid and Medicare received from drugmakers.

    Medicare spending

    Overall, CMS said Part D spent $137.4 billion on prescription drugs in 2015, up from $121.5 billion in 2014. Medicare Part B spent $24.6 billion on prescription drugs in 2015, up from $21.5 billion in 2014.

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    The Medicare drug spending dashboard included more detailed information on 40 drugs covered under Medicare Part D and 40 drugs covered under Medicare Part B. While those 80 drugs represent a small share of total drugs covered under the two programs, they account for a disproportionate amount of Medicare spending, Politico Pro reports.

    When looking at individual drugs, the data show Gilead Sciences' hepatitis C treatment Harvoni accounted for most of Medicare's prescription drug spending last year, at $7.03 billion. That was followed by:

    • Sanofi's insulin Lantus, which accounted for $4.4 billion in spending; and
    • The statin Crestor, which accounted for $2.9 billion in spending.

    CMS also announced that the Part D program received $16.3 billion in rebates for brand-name drugs in 2014, with an average rebate of 17.5 percent. Rebates were higher among certain drug classes, the Wall Street Journal reports.

    Physician group: Let Medicare negotiate drug prices

    The data also show that several drugs saw price hikes between 2014 and 2015, prompting significant increases in Medicare spending on those drugs. For instance, the price of Pfizer's Lyrica pain reliever increased by 19 percent in 2015. According to the Wall Street Journal, Medicare spent 26 percent more on Lyrica in 2015 than it did in 2014, totaling $1.8 billion last year.

    In addition, Medicare spent $153 million in 2015 on Salix Pharmaceutical's diabetes drug Glumetza, the price of which increased by 381 percent. According to the Journal, Medicare spent four times more on Glumetza in 2015 than it did in 2014.

    Many of the drugs that experienced the largest price increases were generics, the Journal reports.

    For example, the data show the price of clobetasol propionate, a dermatology drug, increased by 145 percent. Medicare spending on the drug more than doubled from 2014 to 2015 to $389.7 million, despite a 1 percent decline in prescriptions for the drug, according to the data. In addition, the prices of:

    • Hydroxychloroquine sulfate, an anti-malaria drug, increased by more than 370 percent;
    • Econazole nitrate, an antifungal drug, rose by 276 percent; and
    • Mitomycin, a chemotherapy treatment, increased by 163 percent.

    Medicaid spending

    According to the data, Medicaid spent $57.3 billion on prescription drugs in 2015. Medicaid spent the most on:

    • Harvoni, at $2.2 billion;
    • Abilify, an antipsychotic drug, at $2 billion; and
    • Sanofi's insulins, Lantus and Lantus Solostar, at more than $1.4 billion.

    According to Politico Pro, the unit costs of 20 drugs more than doubled for Medicaid from 2014 to 2015. As such, Medicaid spending on those 20 drugs, nine of which were generics, increased from $146 million in 2014 to $486 million last year.

    The data show that the prices of:

    • Valeant Pharmaceuticals' Ativan increased by more than 1,264 percent, accounting for $5.3 million in Medicaid drug spending;
    • Turing Pharmaceutical's daraprim increased by 874 percent, accounting for $16 million in Medicaid spending; and
    • Hydroxycholoroquine sulfate increased by 489 percent.

    Drugmakers respond

    Allyson Funk, a spokesperson for Pharmaceutical Research and Manufacturers of America, said the CMS data "paints a misleading picture" of prescription drug prices. In a statement, she said the data "focuses on a small subset of medicines and ignores the substantial market forces at work to hold down costs."

    A spokesperson for Sanofi in a statement also called the CMS data on Medicare spending "misleading," adding that the company offers a "substantial discount" to Medicare.

    Valeant said it has pledged to not increase prices by more than 9.9 percent annually.

    A spokesperson for Gilead said the cost of Harvoni is lower than the lifetime costs associated with treating hepatitis C (O'Donnell, USA Today, 11/14; Walker, Wall Street Journal, 11/14; Karlin-Smith [1], Politico Pro, 11/14 [subscription required]; Karlin-Smith [2], Politico Pro, 11/14 [subscription required]; Slavitt et al., The CMS Blog, 11/14; CMS fact sheet [1], 11/14; CMS fact sheet [2], 11/14).

    How Houston Methodist reduced the effect of drug costs on revenue

     Houston Methodist Health System faced high drug costs that drained overall hospital revenue. Executives challenged the pharmacy and business office teams to mitigate the impact. Using Revenue Cycle Compass dashboard, Houston Methodist was able to go beyond traditional analytics to show what pharmacy costs could be reimbursed or covered by copay assistance, significantly offsetting initial drug cost.

    Executive hospital leadership also created three new FTE reimbursement coordinator positions to identify the best payment solutions with patients pre-treatment, discuss out-of-coverage treatments with physicians, and work with the insurance predetermination process to navigate one-off cases. In just three years, Houston Methodist saved over $522,000.

    Download the case study

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