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Medicare Part D could save $14.4B using VA drug prices

If Medicare Part D paid prices for prescription medications similar to what the Department of Veterans Affairs pays, there could be an estimated annual savings of 38% to 50%, according to an analysis published in JAMA Internal Medicine.

“Several state and federal efforts to reduce prescription drug costs have proposed using the Department of Veterans Affairs (VA) as a model, given its ability to obtain deep discounts on medications through direct negotiation with pharmaceutical manufacturers and the use of a national formulary,” Brett Venker, PharmD, of the department of pharmacy at Veterans Affairs St. Louis Health Care System in St. Louis, and colleagues wrote. “We used the most recent national data available from Medicare and the VA to quantify the savings Medicare Part D would achieve if it paid the same prices for prescription drugs currently paid by the VA.”

Researchers collected data from CMS on Medicare Part D prescriptions between Jan. 1, 2011, and Dec. 31, 2016. Using the generic product name, they determined gross Medicare spending on each medication, along with the quantity dispensed and the number of claims.

The analysis consisted of the top 50 oral drugs dispensed based on Medicare spending.

If Medicare Part D paid prices for prescription medications similar to what the Department of Veterans Affairs pays, there could be an estimated annual savings of 38% to 50%.

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Researchers then identified matches between Medicare medications and prescriptions dispensed by the VA from 2011 to 2016, considering all comparable data, and calculating how much Medicare would spend annually if it paid VA prices for the same quantity.

The researchers also noted that they made two adjustments to Medicare spending, including not accounting for rebates and subtracting a dispensing fee so that the Medicare data would more accurately match the VA drug spending data.

The analysis revealed that annual net Medicare Part D spending on the top 50 oral drugs ranged from $26.3 billion in 2011 to $32.5 billion in 2016. If Medicare Part D used VA prices in 2016, the cost would have been $18 billion, for a savings of $14.4 billion or approximately 44%.

Researchers found that results were similar when looking at estimated savings from 2011 and 2015, which ranged from 38% to 50%.

“To our knowledge, this is the most up-to-date analysis that directly compares prices between Medicare Part D and the VA, accounting for estimated rebates and using actual VA prices as opposed to publicly reported federal supply schedule prices,” the researchers wrote. “Our analysis of potential savings is conservative by studying only 50 drugs, omitting many high-cost medications with injectable formulations, and focusing on price only without accounting for changes in use that could also lead to savings.” – by Melissa J. Webb

Disclosures: The authors report no relevant financial disclosures.