Industry Groups Praise OIG Report on Medicare Part D Rebates

By Lauren Flynn Kelly

Industry trade groups that would like rebates preserved in the Medicare Part D purchasing system were thrilled to see a Sept. 13 report from the HHS Office of Inspector General that they viewed as dispelling the oft-purported "myth" that rebates are responsible for high drug prices.

The report examining the more than 1,510 brand-name drugs with Part D reimbursement and rebates between 2011 and 2015 found that rebates did not always go up when unit reimbursement grew.

The report also observed that total rebates for brand-name drugs reviewed in Part D rose from $9 billion in 2011 to $17 billion in 2015, but the majority (60%) of that rebate growth was driven by only 10% of drugs. Furthermore, OIG said that while rebates substantially reduced overall Part D spending growth, "they did not prevent increased overall Part D spending…as Medicare still spent $2 billion more for brand-name drugs with rebates in 2015 than in 2011."

America's Health Insurance Plans issued a statement from President and CEO Matt Eyles: "This new HHS-OIG report…clearly demonstrates our effectiveness as a negotiator — and the rebates we secure for seniors in Part D lead to lower costs."

The Pharmaceutical Care Management Association also praised the report for putting to rest "the false narrative about PBM-negotiated rebates" and confirming that rebates lead to lower prescription drug costs in Part D.

But one industry expert says he doesn't think this will alter any possible government action on drug pricing and Part D.

"The OIG's analysis is unfortunately a historical document — in that it only reports on changes in drug prices through 2015," observes Avalere Health Founder Dan Mendelson. And while rebates are "an important market mechanism" for negotiating drug prices, rebates "alone won’t solve the consumer crisis of drug affordability," he says.

From RADAR on Medicare Advantage