Associated Press Excludes Facts in Medicare Drug Spending Article

  • by: Robert Goldberg |
  • 07/26/2016
The AP’s “exclusive“ report on Medicare drug spending excluded many facts that challenge the news outlet’s conclusion that “the rapid rise in spending for pricey drugs threatens to make the popular prescription benefit financially unsustainable.”

By exclusive, AP means selective, since it focused only on 2014-2015 drug spending -- which increased by 15 percent -- and over looked historical and projected changes in drug costs.  

Here's some information AP excluded:

Part D spending grew by 15 percent in 2015 and is expected to grow annually, on average, by 10.9 percent between 2015 and 2020.  And from 2010-2013 gross drug spending (not including rebates and other expenses) grew 10.1 percent.

A 2013 CBO analysis found that Part D drug costs between 2007-2010 “increased by just 1.8 percent per year per beneficiary, growing more slowly than total per capita drug costs.”  From 2010-2013 per capita costs increased by 1.6 percent. 

Specialty drugs accounted for only 6.7 percent of total drug spending per beneficiary in 2007 and 9.1 percent in 2011.   I estimate that

And AP also failed to note just how much “pricey” new drugs were as a percent of total Medicare spending.   In case you’re interested spending on brand drugs for 2015 was $52 billion, around 8 percent of total Medicare spending.  Which is about what it is projected to be for the next 20 years. 

Further, the AP misreports the impact of rebates.  It looks at rebates across the entire program, which includes spending on generic drugs.  AP states: “Rebates for individual drugs…averaged nearly 13 percent across the entire program in 2013, according to government figures, and were estimated at about 17 percent for 2015.”

And AP could have also found that both rebates and administrative costs are increasing faster than part D per capita cost trend.  

Profits plus administrative costs per beneficiary were higher relative to drug costs in 2010 and in 2015 than in 2007.  Which means not all of the slow growth in drug spending was passed back through plan bids

The slow growth in drug spending coincided with a huge increase in the number of Medicare consumers paying thousands out of pocket for drugs deeply discounted under part D.   An Avalere report found:

“The average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs. While most PDPs have historically applied coinsurance to high-cost drugs on the specialty tier, plans have extended coinsurance to drugs on lower tiers in recent years, including those covered on preferred and non-preferred brand tiers. “

This is important because increased cost sharing reduces the use of medicines and the use of medicines reduces other spending.  The Congressional Budget Office notes that a 1 percent increase in the number of prescriptions filled by beneficiaries would cause Medicare’s spending on medical services to fall by roughly one-fifth of 1 percent for all patients.  However, the impact on the use of new medicines in reducing other treatment related costs in patients with a diagnosis of a chronic disease without access to a new drug is more significant:

In fact, “improved medication adherence associated with expansion of drug coverage under Part D led to nearly $2.6 billion in reductions in medical expenditures annually among beneficiaries diagnosed with CHF and without prior comprehensive drug coverage, of which over $2.3 billion was savings to Medicare.

Other studies came to the same conclusions: "Implementation of the Medicare prescription drug plan in 2006 was followed by significant decreases in spending on nondrug medical expenditures among beneficiaries who previously had limited drug coverage. After Medicare Part D started, nondrug medical spending in this group was about $1,200 per year less than expected. The savings were driven principally by seniors making less use of hospitals and skilled nursing facilities."

Another study found that part D spending reduced hospitalizations generally by 4.1 percent.  

Among beneficiaries with limited or no prior drug coverage Part D reduced the number of overnight hospital stays by about 12%, and among beneficiaries with generous prior drug coverage Part D reduced the number of hospital nights by about 21%.

By contrast, the increase in cost sharing – even as rebates and PBM profits increase and net drug prices rise below the rate of inflation – makes people sicker and increases health spending. 

Beneficiaries with higher OOP costs for the more expensive oral cancer drugs were more likely to discontinue or delay drug therapy.

More generally, a survey of all articles that” evaluated the relationship between changes in cost sharing and adherence found that 85% showed that an increasing patient share of medication costs was significantly associated with a decrease in adherence. For articles that investigated the relationship between adherence and outcomes, the majority noted that increased adherence was associated with a statistically significant improvement in outcomes.”

Hence, AP’s exclusive access to Medicare part D data was used to confirm a pre-established claim that new drugs will make the benefit unsustainable.  In AP’s world, at least when it comes to drug prices, exclusive means being selective in what information is published to affirm a previously established prejudice.



Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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