CBO Report: Prices for and Spending on Specialty Drugs in Medicare Part D and Medicaid

A new Congressional Budget Office report Prices for and Spending on Specialty Drugs in Medicare Part D and Medicaid finds that net spending on specialty drugs to treat chronic, complex and rare conditions in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015. In Medicaid that spend doubled from $4.8 to $9.9 billion over the same period. In 2015, brand-name specialty drugs accounted for only 1% of all prescriptions dispensed in both Medicare Part D and Medicaid. However, they accounted for roughly 30% of net spend on prescription drugs. Both programs are large purchasers of prescription drugs, meaning price growth could have big implications for the federal budget, CBO said, and costs are expected to continue to swell.

Report Information

Specialty 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 and Medicaid.

Net spending on specialty drugs in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015. Additionally, 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 its, the Congressional Budget Office examined the net prices paid for specialty drugs and spending on those drugs in Medicare Part D and Medicaid over the 2010–2015 period

Key Findings

Key findings include the following: First, 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.

Second, 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.