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Drug Spending Dashboard Shows Lack of CMS Negotiating Power

While CMS is devoted to providing more transparency through the drug spending dashboard, it is vital to address why these medication costs are increasingly high.

By Vera Gruessner

- Last week, the Centers for Medicare & Medicaid Services (CMS) announced the release of an online dashboard that reports the amount of funds Medicare spends on prescription drugs. The drug spending dashboard covers both Part B and Part D programs, which include medications doctors administer in a clinical setting and medicine patients administer themselves, according to CMS.

Medicare Spending on Prescription Drugs

This type of information is vital in the greater transparency and information access that the general public seeks in the federal government. This kind of data can also be useful for policy development and clinical decision-making among patients and providers.

The drug spending dashboard will also detail three lists – (1) the most expensive 15 drugs by annual spending, (2) the top 15 drugs of largest spending per Medicare beneficiary, and (3) 10 drugs with the highest annual cost rise in 2014.

The online drug spending dashboard also provides info on brand name medication and generics as well as cost trend analysis and user-friendly searchable data. The online dashboard covers $55 billion of the more than $143 billion spent on prescription drugs by the Medicare program in 2014.

“By sharing this information and allowing people to analyze the data, we can increase the knowledge around drug spending and support efforts that are evaluating whether public dollars are being spent most effectively. The drugs included in dashboard are likely to have an impact on spending and should spur public discussion of how these products are affecting the Medicare program,” CMS reported. “We also seek to stimulate the release of additional data that will promote a more complete understanding of value and patient affordability.”

READ MORE: CMS: Payers Must Make Claims Data Available to Beneficiaries

The results show that Hepatitis C and cancer drugs are seeing the greatest increase in cost. Also, there were five Medicare Part D drugs that cost more than $2 billion in total spending last year and more than $1 billion in Part D in 2013. While CMS is devoted to providing more transparency through the drug spending dashboard, it is vital to address why these medication costs are increasingly high.

The biggest reason why Medicare spending on prescription drugs is continually rising is due to Congress passing legislation in 2003 that forbids CMS from negotiating for fair drug prices under Part D with pharmaceutical companies. The pharmaceutical lobby pushed for this legislation, which is not in the best interests of both the federal government and the patient community.

The National Committee to Preserve Social Security & Medicare argues that allowing the federal government agency to negotiate the prices of prescribed drugs could save the Medicare program billions of dollars. Specifically, a report from the Center for Economic and Policy Research (CEPR) shows that cost savings for the US government would range anywhere from $230 billion to $541 billion across a span of 10 years.

When compared to other nations, the US spends twice as much on prescription drugs because CMS does not have the right to negotiate the price of medication with pharmaceuticals. The cost savings that could come about if price negotiations were allowed could be used to strengthen the Medicare program in other arenas.

Additionally, the majority of the public supports allowing drug negotiation for Medicare beneficiaries. There is also nonpartisan agreement throughout the nation for this measure. One poll discovered that “81 percent of Democrats, 86 percent of Independents and 70 percent of Republicans favor federal drug negotiation.”

READ MORE: DoJ Charges 412 in Medicare Fraud Schemes Totaling $1.3B

Another survey from the Kaiser Family Foundation, the Robert Wood Johnson Foundation and the Harvard School of Public Health discovered that most Americans refused to cut Medicare spending in order to reduce the federal deficit and supported pharmaceuticals giving the Medicare program a “better deal on medications for low-income seniors.”

“It makes sense for Medicare to receive the best price available for prescription drugs, just like Medicaid and the VA,” the National Committee to Preserve Social Security & Medicare stated. “In Medicaid, the drug manufacturer provides the federal government discounts for drugs, which are shared with the states.”

“The discount is either the minimum drug amount or an amount based on the best price paid by private drug purchasers, whichever is less.  Current law requires drug companies to charge Medicaid 23 percent less than the average price they receive for the sale of a drug to retail pharmacies.  Drug companies also must provide another discount if a drug’s price rises faster than the rate of inflation.”

“Supporters note that Medicaid rebates, if applied to Part D, would save the federal government money.  According to a 2011 study conducted by the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services, Medicaid rebates were three times greater than the discounts negotiated by Part D for 100 brand name drugs.  In 68 of these drugs, Medicaid rebates were twice as high as rebates granted by the drug companies for Medicare drugs.”

California Health Advocates also reiterated the fact that it is absurd that Medicare does not have negotiating power over prescription drug costs while Medicaid and the Department of Veteran Affairs are allowed to seek lower prices. The organization mentioned that countries in Europe as well as Canada are able to barter for decreased drug costs with pharmaceuticals.

READ MORE: Beneficiary Segmentation, Spending by Healthcare Payer Type

The drug lobby worked tirelessly to have this legislation passed that prohibits this type of drug price negotiating under the Part D Medicare program. However, this only harms the patient community and leads to higher healthcare costs for Medicare.

While the pharmaceutical lobby has mentioned time and time again its high costs for drug research and development, it seems that the industry spends much more on marketing medication to consumers than on producing prescribed pills themselves. Additionally, a number of pharmaceutical companies have increased their budget for lobbying the federal government in 2014.

It would serve the public much more effectively if the Centers for Medicare & Medicaid Services had the right to negotiate prescribed drug prices with pharmaceuticals under the Part D Medicare program.

Image Credit: Center for Economic and Policy Research

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