According to the report, beneficiaries paid $21 billion for prescription drugs in 2021, while plan sponsors only paid about $5.3 billion, according to the study of 79 of the 100 Part D drugs with the most rebates.
The GAO recommends that moving forward, CMS should monitor rebate information to help the agency and Congress determine their impact on formularies and Medicare enrollment.
Plan sponsors raked in $48.6 billion in rebates from manufacturers in 2021, with endocrine metabolic agents, blood modifiers and respiratory agents accounting for about three-fourths of rebates.
GAO explained that across the board, rebates can reduce plan sponsor payments on drugs with a higher gross cost to less than a lower-cost competing drug. This can lower Medicare drug spending since plan sponsor payments are tied to drug costs after rebates.
“However, rebates do not lower individual beneficiary payments for drugs, as these are based on the gross cost of the drug before accounting for rebates,” GAO said. “Thus drugs with higher gross costs generally result in higher beneficiary payments relative to payments for competing drugs with lower gross costs.”
CMS told GAO that evaluating rebate information isn’t necessary because of the agency’s formulary review and noted that CMS is prohibited from interfering with manufacturer and plan sponsor negotiations.
But GAO pushed back on CMS’ explanation, arguing that monitoring rebate information wouldn’t interfere with those negotiations.
“Such monitoring of rebates will be particularly important as the agency implements the provisions of the Inflation Reduction Act of 2022, which will change Part D plan sponsor, beneficiary, and Medicare drug spending responsibility and may affect formulary design and rebates,” GAO said.