Jan 20, 2022 - Health

The drugs pushing prescription prices down for Medicare patients

Illustration: Annelise Capossela/Axios

Although net prices of brand-name drugs have increased significantly over the last decade, the savings produced by generics have actually driven average prescription prices down in Medicare's pharmacy benefit and Medicaid, according to a new analysis by the Congressional Budget Office.

Why it matters: The analysis reiterates that the generic market is largely working as intended.

By the numbers: The average net price of a prescription fell from $57 in 2009 to $50 in 2018 in Medicare Part D, and from $63 to $48 in Medicaid.

  • The drop is largely attributable to the growing use of generics, which jumped from 75% to 90% of all prescriptions nationally during that time frame. The average price for a generic prescription also fell in both programs.
  • But the average net brand-name prescription price more than doubled in Part D and increased by 50% in Medicaid, per the analysis. These increases were driven by higher launch prices for new drugs and price increases of drugs already on the market.
  • Higher launch prices are due in part to more specialty drugs entering the market.

Yes, but: The analysis focused on drugs sold in pharmacies, not drugs administered in hospitals or doctors' offices — which tend to be more expensive and have different market dynamics.

  • And the analysis notes that the share of total prescriptions that are generic may not continue to grow in the same way in the future, partially "because newer brand-name drugs tend to be more costly to manufacture and may be more challenging to replicate as generic drugs."

The big picture: Democrats' legislative agenda — including the party's push to lower prescription drug prices — has stalled in the Senate.

  • But the provisions allowing Medicare to negotiate drug prices would apply only to insulin and certain drugs without competition, which would largely exclude the generic market.

The bottom line: "One reasonable interpretation of these data is that we have a targeted drug price problem, not a general one," said the American Enterprise Institute's Ben Ippolito.

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