Prices for and Spending on Specialty Drugs in Medicare Part D and Medicaid
In 2015, brand-name specialty drugs accounted for about 30 percent of net spending on prescription drugs under Medicare Part D and Medicaid, but they accounted for only about 1 percent of all prescriptions dispensed in each program.
In recent years, the prices charged for certain types of drugs—referred to as specialty drugs—have become a source of concern for many policymakers. Such drugs typically treat chronic, complex, or rare conditions, frequently have high prices, and may require special handling or patient monitoring.
From 2010 through 2015, specialty drugs accounted for a growing share of new drugs introduced to the market, and they were introduced at much higher prices than nonspecialty drugs. Those factors have contributed to increased spending on prescription drugs in Medicare Part D (Medicare’s prescription drug benefit) and Medicaid. Counting spending by all parties:
Net spending on specialty drugs in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015.
Net spending on specialty drugs in Medicaid roughly doubled from 2010 to 2015, rising from $4.8 billion to $9.9 billion.
In 2015, brand-name specialty drugs accounted for about 30 percent of net spending on prescription drugs under Medicare Part D and Medicaid, but they accounted for only about 1 percent of all prescriptions dispensed in each program. Because Medicare Part D and Medicaid are two large purchasers of prescription drugs, increases in spending for those drugs could have important implications for the federal budget.
In this report, the Congressional Budget Office examines the net prices paid for specialty drugs and spending on those drugs in Medicare Part D and Medicaid over the 2010–2015 period. (In each program, the net price for many drugs is lower than the amount paid to pharmacies, also referred to as the retail price, because of manufacturers’ rebates and other discounts.) Key findings include the following:
The net prices paid for brand-name specialty drugs are much higher in Medicare Part D than in Medicaid. In 2015, the weighted average net price for 50 top-selling brand-name specialty drugs in Medicare Part D was $3,600 per “standardized” prescription—a measure that roughly corresponds to a 30-day supply of medication—whereas the weighted average net price for the same set of drugs in Medicaid was $1,920. That difference was attributable to much larger rebates in Medicaid than in Medicare Part D.
Specialty drugs accounted for a growing share of total net drug spending from 2010 to 2015 in both programs, rising from 13 percent to 31 percent of such spending in Medicare Part D and from 25 percent to 35 percent in Medicaid.
For beneficiaries in the Medicare Part D program who took brand-name specialty drugs, average annual net spending on such drugs per person (in 2015 dollars) roughly tripled over the 2010–2015 period— from $11,330 in 2010 to $33,460 in 2015.