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Expand chart
Data: Medicare Payment Advisory Commission; Chart: Andrew Witherspoon/Axios

There's been an explosion in spending on specialty drugs within Medicare's prescription drug benefit over the past decade, and it may be warping insurers' incentives to keep overall costs down.

The bottom line: A single expensive prescription now sends hundreds of thousands of beneficiaries straight into the benefit's "catastrophic phase," where the government picks up most of the tab and insurers have little incentive to manage costs.

By the numbers: In 2007, only 6% of part D spending was on specialty drugs. By 2017, they accounted for 25% of spending, according to the Medicare Payment Advisory Commission's 2019 report.

  • While only 33,000 beneficiaries filled a prescription that was expensive enough to place them in the program's catastrophic phase after a single claim in 2010, by 2016, that number had risen to 360,000.

Once a beneficiary reaches the catastrophic phase, the government covers 80% of their prescription drug costs. The insurer pays 15% and the enrollee pays 5%.

  • Experts say this removes the incentive for plans to manage beneficiaries' spending, driving up costs.
  • Along with other changes to Part D, "the expanding role of high-cost medicines may be eroding plans' incentives for and ability to achieve cost control," MedPAC's James Mathews wrote in congressional testimony delivered yesterday.

The big picture: Prescription drug spending is increasingly driven by specialty drugs, a trend that isn't going to change anytime soon.

  • Drug development is heading more in this direction, as new therapies are increasingly individualized and complicated. This means they often come to market with a high price tag.
  • In 2018, 39 of the 59 new drugs that came to market were specialty drugs, according to a recent IQVIA report.

Go deeper:

Go deeper

5 hours ago - Politics & Policy

Scoop: Sources say Beto plans Texas comeback in governor’s race

Former U.S. Rep. Beto O'Rourke speaks during the Georgetown to Austin March for Democracy rally on July 31, 2021, in Austin, Texas. Photo: Brandon Bell/Getty Images

Former Rep. Beto O’Rourke is preparing to run for governor of Texas in 2022, with an announcement expected later this year, Texas political operatives tell Axios.

Why it matters: O'Rourke's entry would give Democrats a high-profile candidate with a national fundraising network to challenge Republican Gov. Greg Abbott — and give O’Rourke, a former three-term congressman from El Paso and 2020 presidential candidate and voting rights activist, a path to a political comeback.

Texas doctor says he performed an abortion in violation of state law

Pro-choice protesters march down Congress Avenue and back to the Texas state capitol in Austin, Texas, in July 2021. Photo: Erich Schlegel/Getty Images

A Texas doctor disclosed in an op-ed in the Washington Post on Saturday that he has performed an abortion in violation of the state's restrictive new abortion law, which effectively bans the procedure after six weeks.

Why it matters: Alan Braid's op-ed is a direct disclosure that will very likely result in legal action, thereby setting it up as a potential test case for how the abortion ban will be litigated, notes the New York Times.

Mike Allen, author of AM
6 hours ago - Technology

Axios interview: Facebook to try for more transparency

Nick Clegg last year. Photo: Matthew Sobocinski/USA Today via Reuters

Nick Clegg, Facebook's vice president of global affairs, tells me the company will try to provide more data to outside researchers to scrutinize the health of activity on Facebook and Instagram, following The Wall Street Journal's brutal look at internal documents.

Driving the news: Clegg didn't say that in his public response to the series. So I called him to push for what Facebook will actually do differently given the new dangers raised by The Journal.