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Medicare Part D: CMS should monitor effects of rebates on drug coverage and spending : testimony before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives
Medicare Part D: CMS should monitor effects of rebates on drug coverage and spending : testimony before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives
- Collection:
- Health Policy and Services Research
- Alternate Title(s):
- CMS should monitor effects of rebates on drug coverage and spending: testimony before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives
- Contributor(s):
- United States. Government Accountability Office, issuing body.
United States. Congress. House. Committee on Energy and Commerce. Subcommittee on Health, addressee. - Publication:
- Washington, DC : United States Government Accountability Office, September 19, 2023
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Government Regulation
Legislation, Medical
Medicare Part D -- economics
Medicare Part D -- organization & administration
Prescription Drugs -- economics
United States - Genre(s):
- Technical Report
- Abstract:
- Chair Guthrie, Ranking Member Eshoo, and Members of the Subcommittee: I am pleased to be here today as you examine the role of Medicare coverage in providing access to innovative drugs, medical devices, and technology. In particular, Medicare coverage of prescription drugs plays a key role in giving Medicare beneficiaries access to drug treatments, including new innovative prescription drugs, and has profound effects on the program’s fiscal sustainability. In 2021, approximately 49 million Medicare beneficiaries received prescription drug coverage through Medicare Part D, with drug expenditures of more than $200 billion. Medicare provides this drug coverage to Medicare beneficiaries through drug plans provided by Part D plan sponsors, private companies who contract with the Centers for Medicare & Medicaid Services (CMS). These drug plans vary in their premiums, in their lists of covered drugs - known as formularies - and in associated beneficiary cost-sharing. Plan sponsors place drugs into different tiers which vary in their cost-sharing amounts and are meant to encourage beneficiaries to use drugs on tiers with lower cost-sharing. Plan sponsors, or pharmacy benefit managers (PBM) on their behalf, may negotiate rebates from drug manufacturers. These manufacturers provide payments to sponsors when a beneficiary purchases a drug in exchange for that drug’s inclusion on a plan’s formulary. Policymakers and others have noted tradeoffs in the effect that rebates may have on Medicare Part D drug spending and beneficiary access to drugs, as well as on competition among prescription drugs. Rebates reduce gross spending for drugs - the total amount paid to pharmacies by plan sponsors and beneficiaries - and lower premiums for all beneficiaries. However, beneficiaries may not directly benefit from rebates when they purchase drugs. This is because their cost-sharing is based on the gross price of a drug paid to a pharmacy, before any rebates are taken into account. As a result, beneficiaries who use highly rebated drugs may pay higher cost-sharing. Furthermore, higher rebates for established drugs may create an incentive for plan sponsors to give them more preferred placement on their formularies (e.g., placing them on a tier with lower cost-sharing) over new drugs entering the market with lower costs, but fewer rebates. My testimony today summarizes findings and a recommendation from our September 2023 report examining rebates in the Medicare Part D program. Accordingly, my testimony discusses 1. rebate and expenditure information for Part D drugs; 2. the types of rebate arrangements negotiated between selected pharmaceutical manufacturers and Part D plan sponsors; 3. the relationship between rebates and Part D formulary placement for competing drugs; 4. the implications of rebates on spending by Part D plan sponsors, beneficiaries, and the Medicare program; and 5. the fact that CMS does not consider rebate data as part of its oversight of Part D plan formularies. To conduct this work, we analyzed CMS drug expenditure and rebate data for Part D drugs in 2021 (the data most recently available at the time of our analysis); reviewed selected rebate agreements between plan sponsors and drug manufacturers; reviewed CMS documentation; and spoke with CMS officials, plan sponsors, and manufacturers. More detailed information on the objectives, scope, and methodology of this work can be found in the issued report.
- Copyright:
- The National Library of Medicine believes this item to be in the public domain. (More information)
- Extent:
- 1 online resource (1 PDF file (9 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 9918734184706676 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/9918734184706676