OIG: Part D rebates grew but not enough to offset price spikes

Medicare spending costs money
The Department of Health and Human Services' Office of Inspector General found that while rebates increased from 2011 to 2015, it was only for a minority of drugs.(Getty/zimmytws)

Rebates for Medicare Part D grew by $2 billion from 2011 to 2015, but the growth was limited to a minority of Part D drugs and wasn’t enough to offset major spikes in drug prices, a federal watchdog found.

The Department of Health and Human Services’ Office of Inspector General (HHS OIG) released a report Friday that detailed whether drug rebates grew to meet increases in prices. The report comes as drug rebates have received intense scrutiny from the Trump administration.

OIG analyzed 1,510 brand-name Part D drugs that got rebates in every year from 2011 through 2015. During that five-year period, rebates for the drugs reviewed increased from $9 billion to $17 billion. But while the total rebates almost doubled, that wasn’t true for all individual drugs.

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“Increases in rebate dollars were overwhelmingly allocated to a minority of drugs,” the report added.

OIG found that 10% (151 out of 1,510 drugs) of brand-name drugs with rebates accounted for 60% (or $5 billion) of rebate growth from 2011 to 2015.

RELATED: GAO: PBMs passed on nearly all Part D rebates to plans in 2016

Overall, 42% of brand-name drugs reviewed had decreases in unit rebates from 2011 to 2015.

In addition, rebates were not able to fully reduce growth in Medicare spending on Part D drugs from 2011 to 2015.

Medicare spent $2 billion more for brand-name drugs with rebates in 2015 than it did in 2011, OIG found.

The analysis, which was requested by Congress, comes as scrutiny over Medicare Part D rebates has increased.

RELATED: PBM executives to lawmakers: Ending rebates isn't the fix to push pharma to lower prices

Earlier this year, HHS released a proposed rule that aimed to remove the safe harbor for rebates. HHS Secretary Alex Azar has called rebates an incentive for driving up drug prices as pharmacy benefit managers and insurers get a cut of the rebate amount and will only put higher priced drugs on their formulary.

The proposed rule would have meant that rebates would not be shielded from prosecution under federal anti-kickback laws. The rule would have replaced the safe harbor for rebates with a new safe harbor for discounts offered at the point of sale such as the pharmacy counter.

But the White House pressured HHS to withdraw the rule because of concerns it would raise premiums for seniors. Azar has said he still wants to get rid of rebates.

The PBM industry cheered the results from the OIG.

"Today’s OIG report further dispels the false narrative about PBM-negotiated rebates and confirms that rebates lead to lower prescription drug costs in the Medicare prescription drug program," said JC Scott, president and CEO of the PBM industry group Pharmaceutical Care Management Association. "Drug manufacturers alone set and raise drug prices."

The insurer-backed Campaign for Sustainable Rx Pricing added that the study shows "incontrovertible evidence" that brand-name drug are the culprit behind high drug prices.

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