Sept. 10—Medicare’s Part B program would have saved $3.1 billion in 2011 if it had followed Medicaid’s lead in requiring that drugmakers provide rebates, a government watchdog concluded.

The latest estimate of potential savings from the Part B drug program by the Office of Inspector General (OIG) concluded such a program would have reduced the amount Medicare Part B spent in 2011 on drugs—$13.9 billion—by 22 percent.

An alternate change in the way the program calculated the drug payments would have saved an estimated $2.7 billion, or 20 percent, in 2011.

The potential for savings is even greater than what the OIG estimated a Part B rebate program could have provided if it had been in place in 2010: $2.4 billion. The latest estimate was based on an extrapolation from a larger sample of frequently prescribed drugs.

Recommendations from the OIG

Medicare bases its Part B payments for drugs on average sales prices. Medicare also pays hospital outpatient departments for Part B-covered drugs on the same basis, but only when the drugs are considered “separately payable.” 

The OIG recommend that the Centers for Medicare & Medicaid Services (CMS) further examine the potential for a prescription drug rebate program under Medicare Part B.

“Such analysis should consider how a rebate program might affect drug prices in Medicare and other markets, beneficiary access to useful therapies, beneficiary cost-sharing, provider acquisition costs, and administrative costs,” the OIG report stated.

Action by CMS Unlikely

CMS Administrator Marilyn Tavenner declined to review administrative obstacles to a drug rebate program because such a change would require an act of Congress. and President Barack Obama’s budget has yet to propose such a change. 

“With all of the existing priorities of the agency that are currently in statute, CMS is unable to devote significant administrative resources at this time to a proposal that is neither a provision of current law or actively under consideration,” Tavenner wrote. 

Legislation to institute a Part B drug rebate program was introduced in the last Congress by Sen. Herb Kohl (D-Wis.). Kohl retired at the end of that Congress. No current version of the bill has been offered.

Publication Date: Tuesday, September 10, 2013