OIG Report: Drug Rebates Would Save Money Under Medicare Part B

Sep 5, 2017 Issues: Health Care

WASHINGTON, DC – Rep. Sander Levin (MI-09), Ways and Means Subcommittee on Health Ranking Member, today released the following report from the Department of Health and Human Services (HHS) Office of Inspector General (OIG) on Medicare Part B prescription drug prices. The report examined how much the Medicare Part B program could have saved if pharmaceutical manufacturers that raise drug prices faster than inflation had been required to pay a rebate for those price increases. The OIG found that Medicare could have saved up to $1.8 billion in 2015 alone, if this good-governance practice were put into law.

“We constantly see reports and hear concerns from seniors about the continued rising costs of prescription drugs,” said Rep. Levin. “Congress should act to implement commonsense reforms to discourage drug manufacturers from imposing huge cost increases, and this report provides a first step toward that goal. It’s past time for Congress to act to lower the cost of prescription drugs.”

The report examined a subset of the most common prescription drugs, those which account for 81 percent of expenditures. In 2015, Medicare and beneficiaries spent a total of $28.5 billion for Part B drugs. Levin and former Rep. Jim McDermott wrote HHS in 2016 asking them to examine the potential savings from inflation-indexed rebates.

Federal law requires Medicaid prescription drug manufacturers to pay a rebate if average manufacturer prices (AMP) increase faster than inflation. There is no such law protecting Medicare Part B prescription drugs from similar increases.

The pdf version of the report can be found here. The text of Rep. Levin and McDermott’s original letter to HHS requesting the report is available here.