Soaring Medicare Part D Drug Prices: A Deep Dive into the Alarming Trend

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Medicare Part D is the pharmacy benefit for people on Medicare. It is an essential program giving older populations access to life-saving medications. However, a recent AARP Public Policy Institute report discovered that the cost of top Medicare Part D drugs has tripled over the past six years.

The report outlines a quirk of prescription economics: rapid inflation of brand-name drugs. Looking at new-to-market drug prices from 2016 to 2022, the study found that launch prices of 684 brand-name drugs in the Medicare Part D program surged by 213%. Since fixed incomes did not keep pace with average inflation, much less rapid prescription inflation, seniors were caught in a losing battle.

The launch price is the cost of a new, brand-name drug when it gets to market. In 2016, the average launch price was high at approximately $4,500. Six years later, the average launch price jumped to a staggering $13,900 in 2022. The ballooning subsidy on Medicare’s Part D program is forcing increased copays and coinsurance amounts, meaning the rise in launch prices is passed on to Medicare beneficiaries who cannot afford the added cost.

Defenders of the high launch prices point to generic drugs as an affordable alternative, but this conclusion has three problems. First, the report noted that launch prices of generic drugs also increased dramatically by 98% between the same years, 2016 and 2022. This challenges the conventional belief that generics will always provide cost relief. Second, generics are not always available because the brand-name patent is still in effect. Third, medicine designated as a specialty drug is more complex, and no biosimilar is yet available. Often, there is no equivalent alternative for many newly launched drugs.

The impact is disheartening. Seniors have difficulty deciding between rationing pills, skipping doses, or forgoing therapy altogether. The inevitable result is worsened health outcomes, higher healthcare costs, and increased risk of early death. 

Health plans and self-funded employers name rising drug costs as a top concern. Simply put, the constant rise in launch prices is unsustainable.

The AARP Public Policy Institute’s report highlights the role of advocacy groups and public policy organizations in highlighting the impact of high drug costs. Raising awareness may lead to eventual policy changes, but awareness alone does not help people afford their medication today. Health plans need a solution today.

The tripling of launch drug prices is a significant burden on the Medicare Part D program, and physicians are at the nexus of the issue. RazorMetrics helps Medicare health plans manage the risk by focusing on physicians. Physicians endeavor to prescribe the best drug for their patients, defined as therapeutically efficacious, affordable, available, and covered by their pharmacy benefit. Unfortunately, without help, physicians do not have visibility into medication costs because the variables are complicated, layered, and often confidential. RazorMetrics works directly with physicians to help them prescribe the best drug for their patients based on efficacy and affordability.

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