Drug Prices Paid By Medicare Three Times Higher Than Medicaid

Drug Prices Paid By Medicare Three Times Higher Than Medicaid

Public anger over the rising costs of insulin and other key life-saving drugs has grown in recent years, and now a new federal analysis reveals that Medicare Part D pays far more for medications than any other government health program.  The Congressional Budget Office (CBO) compared prices paid by Medicare Part D with prices paid by Medicaid, the Department of Veterans Affairs, the Department of Defense and the Department of Defense TRICARE retail pharmacy network.

The main analysis focused on the prices (after applicable rebates and discounts) of 176 top selling brand name drugs in Medicare Part D.  The CBO calculated the average price of those drugs per standard prescription, which corresponds to a 30-day supply.

The average price under Medicare Part D was $343, but just $118 in Medicaid.  The Department of Veterans Affairs, and the Department of Defense each paid somewhere in between.

The CBO also looked into the prices of specialty drugs which treat chronic, complex or rare conditions.  The average price of this category of medications ranged from $1,889 in Medicaid to $4,293 in Medicare Part D.

TSCL is hoping that 2021 will be the year in which Congress finally enacts legislation that reduces prescription drug costs by allowing Medicare to negotiate drug prices directly with pharmaceutical companies.  Legislation introduced by Senators Tim Kaine (VA) and Michael Bennet (CO) would allow Medicare to negotiate lower drug prices and would add a public health plan option to the federal health exchange.

The political publication The Hill reports that Members of the House are likely to return to a version of H.R. 3, the prescription drug legislation that passed the House last year but did not receive consideration in the Senate.  That bill would completely change the way the U.S. pays for drugs by tying prices to those paid in other industrialized nations where drug prices are much lower.  The Congressional Budget Office estimated H.R. 3 would save the federal government more than $456 billion over 10 years but would lead to 40 fewer drugs over the next 20 years (about two fewer per year).  In 2019, the FDA approved 48 new medicines.


Sources:  “A Comparison of Brand-Name Drug Prices Among Selected Federal Programs,” Congressional Budget Office, February 2021.  “Bennet, Kaine Announce Introduction of Medicare-X Choice Act to Achieve Universal Health Care,” February 17, 2021.