What's driving higher drug spending in Medicare and Medicaid?

Drugs with only one manufacturer have driven the largest increases in Medicare and Medicaid drug spending, according to data CMS posted to its Drug Spending Dashboards on Thursday.

Learn 5 ways to control the flow of drug expenditures

Details on the dashboards

CMS first launched the dashboards under former President Barack Obama. The dashboards contain data for several drugs that met certain criteria, such as high total spending. The data are most often used by journalists, nonprofits, and researchers examining drug price trends.

CMS last year updated the dashboards and significantly expanded the amount of data available on Medicare and Medicaid drug spending and list prices, including the majority of drugs covered under Medicare Part B, Medicare Part D, and Medicaid. The redesigned dashboards display the percentage change in drug spending per dosage unit.

Dashboards show drugs with one manufacturer drive large increases in Medicare, Medicaid spending

CMS on Thursday updated the dashboards with data from 2017. The new data showed total gross spending on prescription drugs in 2017 increased to:

  • $154.9 billion for Medicare Part D;
  • $67.6 billion for Medicaid; and
  • $30.4 billion for Medicare Part B.

In particular, the data showed that average spending per dosage unit for prescription drugs increased by 10.6% under Medicare Part B from 2013 to 2017, and by 10% under Medicare Part D. Medicaid prescription drug spending increased by nearly 15% from 2013 to 2017, according to the data.

The new data also showed that drugs with only one manufacturer accounted for the largest spending increases in Medicare and Medicaid, even when there were other treatment options available for a specific disease, Politico's "Pulse" reports. For example, the data showed Medicaid spending on the antibiotic Daptomycin rose by more than 13,000% when only one manufacturer produced the antibiotic from 2013 and 2017, but the drug's average price per dose decreased by 22% in 2017, when a second manufacturer began producing a generic version of the treatment.

HHS Secretary Alex Azar said the data highlighted "the kind of abusive behaviors" the Trump administration is trying to address (Paavola, Becker's Hospital Review, 3/14; Reed, FierceHealthcare, 3/15; Diamond, "Pulse," Politico, 3/15; CMS release, 3/14).

5 ways to control the flow of drug expenditures

Prescription drug expenditures are the fastest growing component of health care spending. And while reducing unwarranted prescribing variation is the single biggest improvement opportunity, there are several other near-term chances to reduce spending and grow revenues.

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