GAO: New drugs account for highest costs in Medicare Part B

After examining the expenditures on the five highest-cost Medicare Part B drugs, a report by the Government Accountability Office (GAO) found that high costs were concentrated among a small number of drugs and conditions.

In the report, GAO found that new drugs paid for by Part B were more likely to be biologic, be approved to treat a narrower range of conditions, and to have used a Food and Drug Administration (FDA) program to expedite their development and review. Additionally, the report says that new Part B drugs were more likely than new non-Part B drugs to have received an orphan designation, which applies to drugs that treat rare conditions and are received by a relatively small number of people.

The GAO discovered that the 20 highest-expenditure drugs accounted for approximately 92 percent of 2013 expenditures on new Part B drugs, and for 26 percent of total expenditures for all Part B drugs. Total Part B drug expenditures grew at an average annual rate of 4.4 percent from 2007 through 2013, and this growth was driven primarily by new Part B drugs, GAO states.

Indeed, healthcare experts have been predicting a potential rise in Medicare Part B premiums due to the rising cost of new drugs, especially drugs that treat chronic diseases, the Associated Press reports. The Obama administration is specifically concerned about the cost of new breakthrough drugs, since insurers that deliver Medicare's prescription benefit have limited options for bargaining down the prices of those medications.

"Great strides forward in medical science will not be very useful if people cannot afford them," said Rep. Van Hollen, the senior Democrat on the House Committee on the Budget, according to the Wall Street Journal. "When you are asking people to spend tens of thousands of dollars out of their own pocket to treat diseases like cancer, we have a serious problem."

Despite a heated debate about rising drug prices in the U.S., experts say that the price increase in Part B drugs has less to do with their direct cost than the cost of their long-term benefits.

To learn more:
- read the GAO report summary
- read the full GAO report (pdf)
- read the Wall Street Journal article
- here's the AP report

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