News & Commentary

Pharmacy Copays, Out-of-Pocket Costs Rise As Spending on Medicare Drugs Soars


The cost of Cuprimine (250-mg oral capsule), a drug used for rheumatoid arthritis and Wilson’s disease, increased 2,143%, from $6 in 2011 to $135 in 2015. In that same time period, the cost of Stelara (a solution of 45 mg per half millimeter), a drug used to treat autoimmune disorders, rose 93%, from $5,523 to $10,669. Only next to 2,143% would 93%—almost a doubling—seem moderate.

That in a nutshell describes part of the problem with trying to control Medicare Part D drug costs, as outlined in an HHS Office of Inspector General report issued in June. The prices are rising, and Medicare beneficiaries are getting hit hard because many of the drugs are maintenance drugs used to treat chronic conditions. The report notes that “increasing reimbursement for these drugs will continue to affect Part D and its beneficiaries for years to come.”

Total beneficiary out-of-pocket costs (which include deductibles, copayments, and coinsurance) were highest for brand-name insulins, cholesterol-lowering drugs, and inhalers. Total costs for these drugs was $6.5 billion higher in 2015 than in 2011.

Utilization for the majority of the brand-name drugs decreased over the five years covered in the report, but that drop was offset by the unit cost increasing 29%, nearly six times the 5% rate of inflation. In addition, the percentage of beneficiaries responsible for out-of-pocket costs of at least $2,000 a year for brand-name drugs nearly doubled in the five years.

Part D spending for brand-name drugs rose about 75% over the five years, from $58 billion to $102 billion. Rebates for drugs—which pharmaceutical companies tout as their attempt to control costs—rose as well, from $9 billion in 2011 to $23 billion in 2015, but did not seem to have much of an effect on easing the financial burden on patients. The total rebate-adjusted reimbursement under Part D still increased from $49 billion in 2011 to $80 billion in 2015.

In addition, the percentage of brand-name drugs for which pharma companies paid rebates also decreased, from 72% (2,612 of 3,637) in 2011 to 61% (3,328 of 5,492) in 2015.

For nearly half of the 3,578 brand-name drugs reimbursed under Part D, unit costs increased nearly 50%. A majority of the drugs had lower utilization in 2015 than in 2011. The 200 most utilized brand-name drugs accounted for 85% of prescriptions in 2015 and 71% of total costs.

“In other words,” the report states, “the brand-name drugs with utilization decreases were associated with greater increases in unit costs.”