Medicare could have collected up to $3.1 billion in 2011 under a drug rebate program similar to the current Medicaid discount policy, according to a report from the HHS Office of Inspector General.
The OIG calculated how much pharmaceutical manufacturers would have owed to Medicare in rebates for 60 common procedure codes representing 85 percent of total Medicare Part B medical insurance drug expenditures. Medicare could have received $3.1 billion — 22 percent of spending for Part B drugs — in rebates determined based on average manufacturer prices, according to the report. If the rebates were based on average sale prices, the program could have collected $2.7 billion or 20 percent of spending.
State and federal governments already save on prescription drugs through the Medicaid Drug Rebate Program, which allowed government entities to recoup $13 billion of the $28 billion the program spent on prescription drugs in 2011. Medicare Part B spent $16.4 billion on prescription drugs that year, according to the report. Although Medicare Part D covers most prescription drugs, Part B generally covers drugs furnished incident to physician services, such as injectable drugs used to treat cancer. Part B also covers drugs used in conjunction with durable medical equipment and medications explicitly covered by statute, such as certain vaccines.
The report recommends that CMS examine the potential effect of creating a prescription drug rebate program under Medicare Part B and seek legislative change to enact a drug discount program if appropriate. CMS should also address administrative issues that could hinder rebate collections, according to the OIG.
CMS didn't agree with the OIG recommendations, according to the report. The agency told the OIG it would take considerable resources to perform a comprehensive examination of the potential impact of a rebate program, and it can't devote those resources to a proposal that isn't current law or under consideration. Furthermore, CMS stated a legislative change would be needed to establish a rebate program, and that sort of reform isn't included in President Obama's annual budget.
Despite the feedback for CMS, the OIG concluded a rebate program warrants further consideration given its savings potential.
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