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Prescription Drug Spending Rises Slightly for Fee-for-Service Medicare

The medication portion of Medicare fee-for-service spending was relatively stable between 2008 and 2019, rising from 24.0% to 27.2% of all Medicare dollars, according to an analysis of a 20% random sample of beneficiaries enrolled in Parts A (hospital), B (medical), and D (prescription drugs) continuously during each those calendar years. The figures reflect net expenditures after accounting for postsale rebates, which rose over this time period, and inflation.

The main outcomes and measures in the study were net spending on retail (Part D–covered) and clinician-administered (Part B–covered) prescription drugs; prescription drug spending (spending on Part B–covered and Part D–covered drugs) as a percentage of total per-capita health care spending. In the sample, beneficiaries numbered 3.2 million in 2008 and 4.5 million in 2019. “In 2019, beneficiaries had a mean (SD) age of 71.7 (12.0) years, documented sex was female for 57.7%, and 69.5% had no low-income subsidies,” the authors report. “Total per-capita spending was $16,345 in 2008 and $20,117 in 2019. Comparing 2008 with 2019, per-capita Part A spending was $7106 (95% CI, $7084-$7128) vs $7120 (95% CI, $7098-$7141), Part B drug spending was $720 (95% CI, $713-$728) vs $1641 (95% CI, $1629-$1653), Part B nondrug spending was $5113 (95% CI, $5105-$5122) vs $6702 (95% CI, $6692-$6712), and Part D net spending was $3122 (95% CI, $3117-$3127) vs $3477 (95% CI, $3466-$3489). The proportion of total annual spending attributed to prescription drugs increased from 24.0% in 2008 to 27.2% in 2019, net of estimated rebates and discounts.”

Editorial: “[These] findings … have important implications, 3 of which deserve further discussion when considering the Inflation Reduction Act and future evaluations of its potential influence,” editorialists write. “First, the study was limited to Medicare fee-for service beneficiaries, for whom the Centers for Medicare & Medicaid Services data contain complete medical and pharmaceutical claims.…

“Second, while Part D drugs account for the majority of Medicare pharmaceutical spending, virtually all of the drug spending increases over the study period were attributable to clinician-administered drugs covered under Part B.…

“Third, while the percentage of total Medicare spending on drugs is an important metric for policy discussions, even more valuable would be a breakdown of who is paying these costs (eg, patients, government, private plans) and how that breakdown has changed over time.…

“[This analysis] provides key baseline metrics for future evaluations of the effects of the Inflation Reduction Act on prescription drug use and spending in Medicare. Understanding the magnitude of these effects, and the inevitable unintended consequences, will set the stage for whatever comes next on the continued journey to ensure medication affordability in the US.”

Source: JAMA