Medicare drug prices keep rising faster than inflation, and 8 in 10 adults say the cost of prescription drugs is unreasonable. A recent Health Affairs article examines how and why Medicare Part D net prices are “significantly higher and growing much more rapidly than those paid by other payers, such as Medicaid. . . “.

The article references two Congressional Budget Office publications that found that Part D brand name costs are high relative to other federal payers and have grown much faster than inflation. The reports find that “market-wide assessments of net price growth hide significant variation” across payers. When considering both the net price growth and the change over time in the mix of drugs taken by people with Medicare, brand name drug costs grew more than five times the rate of inflation from 2009 to 2018. They argue that this increase “is largely driven by use of high-price specialty drugs, which are a growing share of the drug pipeline,” and that comprehensive reform is needed to avoid increasing burdens on Medicare, taxpayers, and beneficiaries because most of the expected gains from lower-cost generics have been realized.

Earlier this year, Medicare Rights flagged an AARP Public Policy Institute analysis that found drug companies increased list prices for 75 of the 100 brand name drugs with the highest Medicare Part D spending within the first two months of 2022. These increases mean that copayments or coinsurances that people expected when choosing their Part D plan during open enrollment may have also increased. Plans may change coinsurance and copay amounts when manufacturers change prices because copay amounts are set based on the full cost of the medication. These adjustments and increases can result in surprise increases in costs at the pharmacy counter.

These reports make it even more apparent that we must take immediate action to reform drug pricing. We support comprehensive efforts to lower prescription drug prices through capping beneficiary out-of-pocket (OOP) drug costs; realigning Part D financial obligations; penalizing drug manufacturers for price hikes that outpace inflation; and allowing Medicare to negotiate drug prices.

Read the Health Affairs article.

Read more about the AARP analysis.