Medicare spent $1.4B on discarded Part B drugs in 2017 and 2018: report

Medicare spent $1.4 billion in 2017 and 2018 on Part B drugs that were discarded, a new report shows.

MedicareAdvantage.com, an MA insurance broker, analyzed claims data from the Centers for Medicare & Medicaid Services (CMS) and found that Medicare spent $695 million on discarded Part B drugs in 2017 and $725 million in 2018.

Most of the drug waste in that two-year period was unused units of cancer and chemotherapy drugs, according to the report. In many cases, a single-dose vial contains a higher dose than is needed, leading to the excess being discarded.

For 49 different drugs, Medicare wasted more than $1 million each in 2018 alone, according to the report.

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Medicare Part B covers drugs administered by providers, while prescription drugs are covered under Part D. Part B only accounts for about 16% of Medicare drug spend, according to the report, and in 2018 alone Medicare spent $168.1 billion on drugs in Part D.

The report notes that there are no data publicly available on how much is spent in Part D on wasted or unused drugs. CMS only began releasing data on Part B spend on discarded drugs in 2017.

Though the waste identified in the study accounts for just 2% of Medicare spend, it represents a significant opportunity for savings for other costs, the MedicareAdvantage.com team argues. For example, that $1.4 billion in waste could have purchased 87,000 hospital ventilators, about 16 for each hospital in the country.

The $1.4 billion could also cover a year's worth of insulin for more than 3.3 million Part D beneficiaries, according to the report.

The traditional "buy and bill" model for providers stocking Part B drugs plays a key part in driving up costs, according to the report. In this approach, the provider buys vials of a therapy and then bills when they're used, incentivizing the waste of any excess product to secure the full reimbursement per vial.

This model is a boon for drug manufacturers as well, according to the report.

"Profits are increased by billing for the whole vial, even if only a portion of it is needed and used," the analysts wrote. "Doctors and hospitals also enjoy bloated profit margins under this system."