55% of top-selling Medicare drugs have low added benefit ratings

Key takeaways:

• Drugs with low added benefit ratings accounted for 11% of total Medicare net spending in 2020.
• The findings have implications for drug price negotiations under the Inflation Reduction Act.

Twenty-seven brand-name drugs that accounted for nearly $2 billion in Medicare net spending in 2020 received a low added therapeutic benefit rating by health technology assessment agencies in Canada, France and Germany, a recent study found.

In the United States, brand-name drug manufacturers are able to set prices at launch and “freely raise” them later, Alexander C. Egilman, BA, a member of the division of pharmacoepidemiology and pharmacoeconomics at Brigham and Women’s Hospital, and colleagues wrote in JAMA. Consequently, brand-name drugs in the U.S. cost two to three times more compared with prices in other countries.

Now, the Inflation Reduction Act of 2022 will allow CMS to negotiate drug prices for a small number of top-selling drugs. The first negotiated prices will likely take effect in 2026, according to the researchers. Negotiations are based on several factors, including the drugs’ benefits compared with therapeutic alternatives.

However, “unlike many industrialized countries, the U.S. has long had no national process for assessing the clinical benefits of drugs compared with existing treatment options and then negotiating prices based on the added therapeutic benefits they offer to patients,” Egilman said in a press release. “Therefore, our primary motivation was to understand the added benefits of high expenditure Medicare drugs according to foreign [health technology assessment (HTA)] organizations.”

Egilman and colleagues conducted a cross-sectional study using public 2020 Medicare drug spending data to assess the 50 single-source brand-name drugs with the highest pre-rebate spending in Medicare Part D and Part B. The researchers then analyzed the drugs’ therapeutic ratings that were made by HTAs in Germany, Canada and France. Because of varying assessments by countries, the researchers said they based the benefits of each drug on the most favorable HTA rating.

Overall, 49 drugs received an HTA rating by at least one country and had a pre-rebated Medicare spending of $101 billion. Across all countries, 27 drugs received a low added benefit rating. These drugs accounted for:

• $1.9 billion in annual estimated Medicare net spending;
• 35% of Medicare net spending on the 50 top-selling single-source drugs; and
• 11% of total Medicare net spending in 2020.

Many of the drugs with low added benefit ratings were used to treat endocrine disorders (41%) and respiratory diseases (22%), while drugs with high added benefit ratings often treated cancer (46%).

Additionally, the drugs with low added benefit ratings were used by a median of 387,149 Medicare beneficiaries, significantly higher compared with drugs that had high added benefit ratings (n = 44,869). The drugs with high ratings also had lower median net spending per beneficiary ($992 vs. $32,287), according to the researchers.

Of the 10 drugs projected for price negotiation in 2023, Egilman and colleagues reported that seven were rated as having low added benefits.

“For these drugs, Medicare could ensure that they are not priced higher than alternative treatments that offer similar therapeutic benefits to patients,” they wrote. “Canada, France, and Germany have already implemented a similar approach because drugs found to offer minor or no added benefits must be priced in accordance with or below comparators to be granted coverage.”

Still, the researchers stressed that not all drugs were reviewed by the three countries, and some had different HTA ratings.

“This highlights the importance of the U.S. enacting its own HTA process that could be used to inform price negotiations by Medicare and other payers,” they wrote.

References:

• Egilman A, et al. JAMA. 2023;doi:10.1001/jama.2023.4034
• Over half of top selling Medicare drugs have low added therapeutic benefit. https://www.eurekalert.org/news-releases/986371. Published April 28, 2023. Accessed April 20, 2023.