Key points:
- Private insurers that sponsor Medicare Part D are artificially inflating the costs of certain generic drugs by overpaying pharmacies.
- In the case of a specific cancer drug, insurers were reimbursing pharmacies an average of $126 per tablet when the drug cost only $4.20 per tablet.
- Medicare is meant to keep healthcare affordable for seniors, but these financial markups lead to high out-of-pocket costs.
Medicare, the largest provider of health insurance in the United States, is meant to keep healthcare affordable for seniors. However, new research, published in Journal of the American Medical Association, finds that private insurers that sponsor Medicare Part D are artificially inflating the costs of certain generic drugs by overpaying pharmacies.
An earlier study raised concerns about Part D sponsors over-reimbursing pharmacies for a cancer drug called abiraterone. Generic over-reimbursement means that patients may face higher out-of-pocket costs.
“For instance, if a patient pays 30% as a copayment for a drug, that 30% would be applied to the inflated price, which could mean higher out-of-pocket costs for seniors,” explained corresponding author Inmaculada Hernandez, professor at UC San Diego.
In this study, researchers gathered and analyzed data from the Centers for Medicare and Medicaid Services to examine spending and reimbursement for 50 generic drugs that Medicare Part D spent the most on in 2021. They found that some Medicare Part D sponsors were reimbursing at much higher rates than what pharmacies spent to acquire the drugs.
One of the most dramatic reimbursement examples was a cancer drug. The researchers determined that insurers were reimbursing pharmacies an average of $126 per tablet when the drug cost only $4.20 per tablet to the pharmacy. This average markup was 3000% or $3600 per 30-day prescription.
“Seniors are clearly paying more for their medications as a result of these markups,” said Hernandez. “More research is needed to confirm the scope of these practices, but the evidence is concerning.”