Trump Bid to Shame Drugmakers Shows Medicare Costs Soaring

(Bloomberg) -- The U.S spent 60 percent more on drugs for Medicare patients in 2016 than it did in four years earlier, according to newly released federal data, countering pharmaceutical industry arguments that prescription medicine represents only a small and stable portion of health-care costs.

Among top-selling drugs in the program, the per-unit cost of Sanofi’s Renvela, which is used by dialysis patients, climbed by an average of 21.6 percent between 2012 and 2016, the most recent year for which data are available. Unit costs for AbbVie Inc.’s Humira, a blockbuster rheumatoid arthritis drug, rose at an average pace of 18 percent a year during the same period, according to the figures released Tuesday by the Trump administration.

The government disclosed the information as part of an updated dashboard that includes information on annual drug-price increases for several federal programs, including Medicare, for the elderly, and Medicaid, which covers the poor. In an attempt to shame drugmakers into keeping list prices down, the dashboard highlights drugs with particularly rapid increases in unit costs.

‘Important Step’

“For years Medicare incentives have actually encouraged higher list prices for drugs,” Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said in a statement. “This updated and enhanced dashboard is an important step to bringing transparency and accountability to what has been a largely hidden process.”

Medicare spent more than $174 billion on drugs in 2016, or 23 percent of the program’s budget, up from $109 billion and 17 percent in 2012, according to the data.

A spokeswoman for Sanofi said the average list price for the company’s drugs rose by only 1.5 percent in 2017 after it put in place a new policy to limit increases. A spokeswoman for AbbVie didn’t immediately respond to a request for comment.

The figures released Tuesday don’t present a complete picture because they don’t include rebates, confidential discounts that drugmakers negotiate with insurers and benefit managers. Under Medicare, senior citizens don’t currently share in the rebates directly and often have to pay a copay based on a percentage of a drug’s list price.

The dashboard “continues to paint a misleading picture” about Medicare and Medicaid drug spending because it focuses on list prices while leaving out the rebates, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, an industry trade group, said in an email.

In the Medicaid program, the government spent $521.6 million on Mylan NV’s EpiPen and EpiPen Jr. allergy injectors in 2016. Between 2012 and 2016, annual per-unit spending on the drug grew more than 25 percent per year as EpiPen’s list price surged to more than $600 for a two-pack. Mylan has been criticized by U.S. lawmakers for jacking up the price of the life-saving devices, and settled with the government in 2017 over claims that it defrauded taxpayers by charging the U.S. and states too much.

President Donald Trump had once pledged, to the chagrin of many Republicans, that the federal government would start negotiating with pharmaceutical companies, using its enormous buying power to drive down prices. But the drug-price plan his administration announced last week made no mention of that strategy.

Instead, it preserves -- and in some cases expands -- the role of the pharmacy middlemen the administration has blamed for many problems with drug costs, hoping to use the private sector to help lower prices

©2018 Bloomberg L.P.