Nashville, TN—More and more fee-for-service Medicare spending is attributable to prescription drugs, according to a new study looking at the period from 2008 to 2019.
The Vanderbilt School of Medicine–led study—a descriptive, serial, cross-sectional analysis of a 20% random sample of fee-for-service Medicare beneficiaries—determined that the estimated proportion of total annual spending attributed to prescription drugs was 24.0% in 2008 and 27.2% in 2019, net of estimated rebates and discounts.
That is important, according to an article in the Journal of the American Medical Association, because prescription drug spending in Medicare is of significant interest to the public and policymakers. “However, prior assessments have been limited by focusing on retail spending (Part D–covered drugs), omitting clinician-administered (Part B–covered) drug spending, or focusing on all fee-for-service Medicare beneficiaries, regardless of their enrollment into prescription drug coverage,” the researchers explained.
In light of that, the study team sought to estimate the proportion of healthcare spending contributed by prescription drugs and assess spending for retail and clinician-administered prescriptions. All 3.2 million participants were continuously enrolled in Parts A (hospital), B (medical), and D (prescription drug) benefits, and not in Medicare Advantage.
The study looked at net spending on retail (Part D–covered) and clinician-administered (Part B–covered) prescription drugs, as well as prescription drug spending (spending on Part B–covered and Part D–covered drugs) as a percentage of total per-capita healthcare spending. The data were adjusted for inflation and postsale rebates (for Part D–covered drugs).
At the beginning of the study, 3,201,284 beneficiaries were enrolled in Parts A, B, and D in 2008 compared with 4,502,718 in 2019. In 2019, the mean age of beneficiaries was 71.7 years, with 57.5% females; most (69.5%) had no low-income subsidies. Total per-capita spending was $16,345 in 2008 and $20,117 in 2019.
When comparing 2008 with 2019, the analysis found that per-capita spending for:
• Part A spending was $7,106 (95% CI, $7,084-$7,128) versus $7,120 (95% CI, $7,098-$7,141)
• Part B drug spending was $720 (95% CI, $713-$728) versus $1,641 (95% CI, $1,629-$1,653)
• Part B nondrug spending was $5,113 (95% CI, $5,105-$5,122) versus $6,702 (95% CI, $6,692-$6,712)
• Part D net spending was $3,122 (95% CI, $3,117-$3,127) versus $3,477 (95% CI, $3,466-$3,489).
“The rapid increase in prescription drug prices and the recognition that high drug prices have limited patient access to medicines have increased the sense of urgency surrounding the need to address drug spending through policy intervention,” the authors wrote. “Pharmaceutical industry advocates have long emphasized that prescription drugs represent only a small percentage—approximately 10%—of all health care spending, pointing to national health statistics of retail drug spending. However, this figure likely underestimates drug spending among Medicare beneficiaries. Given the role of Medicare as the primary payer for prescription drugs, it would be instructive to understand trends in prescription drug spending in the fee-for-service Medicare program and the share of spending consumed by prescription drugs.”
The study noted that, while prior estimates of Medicare program spending on prescription drugs have shown increases in overall and per-capita spending over time, they can vary greatly because of differences in the population represented and definitions of “drug” spending.
“Even within reports targeting fee-for-service Medicare beneficiaries, most estimated spending among those enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance) and did not require beneficiaries to be enrolled in Part D (prescription drug insurance),” the authors added. “For such studies, the share of fee-for-service Medicare spending contributed by drugs ranged from 15% to 23%.”
One complicating factor is that while nearly all fee-for-service Medicare beneficiaries are enrolled in Parts A and B, only 76% (as of 2021) were enrolled in Part D.
“Although some beneficiaries who are not enrolled in Part D may have little to no retail drug spending, many may purchase drugs either by paying cash or using another source of credible coverage (e.g., retiree benefits, employer-sponsored plans, veterans’ benefits),” the article concluded. “As a result, studies seeking to define how prescription drugs contribute to overall health care spending among Medicare beneficiaries might have underestimated prescription drug spending when not restricting to those enrolled in Part D.”
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