Estimating Discounts for Top Spending Drugs in Medicare Part D
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J Gen Intern Med DOI: 10.1007/s11606-020-06194-2 © Society of General Internal Medicine 2020
INTRODUCTION
In 2010–2016, US gross drug spending grew by 30%, exceeding $450 billion in 2016.1, 2 Net spending, however, grew slower due to manufacturer discounts2—mostly in the form of rebates to insurers and pharmaceutical benefit managers negotiated in exchange for placement of drugs in preferred formulary tier. The Government Accountability Office estimates that in 2016 manufacturer discounts in Medicare Part D accounted for $29 billion, or 20% of Part D spending.3 Due to the confidential nature of negotiations, rebates and discounts are proprietary, and prior research has not been able to identify which drugs account for the majority of these discounts. We used indirect estimates of discounts from SSR Health4, 5 to identify the top drugs and therapeutic classes contributing to manufacturer discounts in Part D.
METHODS
Using the Medicare Part D spending dashboard,6 we identified 6 high-expenditure therapeutic classes with large rebates based on prior research,5 including insulins, non-insulin antidiabetics, inhalers, hepatitis C direct-acting antivirals (DAAs), direct oral anticoagulants (DOACs), and tumor necrosis factor (TNF) inhibitors. We extracted total Medicare Part D spending in 2016 for all drugs within these classes (n = 80). We obtained SSR Health data on discounts for branded medications whose US sales are reported by publicly traded companies.7 These data have been used in peer-reviewed research.4, 5 SSR Health estimates prices net of discounts by dividing company-reported sales for each product by the number of units sold.7 Discounts are estimated as the difference between list and net prices, and are separately calculated for Medicaid and other payers. For each drug in selected therapeutic classes, we estimated Part D discounts in 2016 US dollars by multiplying total Received May 1, 2020 Accepted August 27, 2020
spending reported in the dashboard by the 2016 average non-Medicaid discount from SSR Health. We used the nonMedicaid discount because SSR Health is not able to separately estimate discounts for Medicare.5, 7 We then estimated what proportion of the $29 billion in total Medicare Part D discounts was accounted for by each drug and therapeutic class. There were 20 drugs with missing discount data because they are manufactured by private companies, including tiotropium, ipratropium, and ipratropium/albuterol. In those cases, we used the mean discount for the remaining drugs in the class as the discount estimate and performed sensitivity analyses excluding them. Because SSR Health discounts include not only rebates from manufacturers to payers but also any other manufacturer concession such as coupon cards or 340B discounts, we performed a sensitivity analysis in which we reduce discounts by 25%.
RESULTS
Discounts and rebates for these six therapeutic classes ranged from 24% (TNF inhibitors) to 60% (insulins and DAAs) (Table 1). These six therapeutic classes accounted for nearly $22 billion, or
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