Medicare Sees Striking Increase in Specialty Drug Costs

Oct 19 2015

In the latest indication that government spending on costly new specialty drugs is soaring, a new analysis by ProPublica finds that Medicare has already spent $4.6 billion this year on two breakthrough drugs for treating the deadly hepatitis-C virus – or almost as much as the hepatitis treatment program spent during all of last year. Rebates should reduce the final cost this year, but spending is expected to move higher on a year-over-year basis nonetheless.

Those two drugs, Sovaldi and Harvoni, manufactured by Gilead Sciences, are in hot demand for treating the serious liver disease thanks to a success rates of well over 90 percent. The new specialty drugs are far superior to older drug treatments and in many cases obviate the need for costly and dangerous liver transplants. But the pills can cost as much as $1,000 a day – or $84,000 for a 12-week course of treatment, before rebates.

Related: Medicare’s Budget Busting $4.5 Billion for Hep-C Drugs

The surge in cost for treating the illness has shocked officials of Medicare and Medicaid, the Department of Veterans Affairs, the federal prison system and other government institutions that treat patients and inmates for the illness. In some cases, providers have been forced to ration the drugs and treat only the most seriously ill patients.

While Gilead and other pharmaceutical companies offer rebates to insurers that operate the Medicare Part D beneficiary drug program, ProPublica’s latest figures suggest that Medicare is on course to double its spending from last year on the hepatitis-C drug treatments, and that Medicaid and other federal agencies may incur similar spending increases.

According to ProPublica’s findings, also published by The Washington Post, pharmacies filled more than 183,000 prescriptions for the drugs between January and June, and they appeared on track to eclipse the roughly 288,000 prescriptions that were filled in all of 2014. Medicare Part D spent an additional $157 million last year on an older generation of hepatitis-C drugs, which brought total expenditures for hepatitis drugs to more than $4.8 billion last year.

Related: As Drug Prices Soar, Doctors Voice Outrage

Overall spending on specialty drugs is expected to increase by 360 percent between 2012 and 2020. Meanwhile, Medicaid and Medicare will see spending on these new drugs far exceed spending for non-specialty pharmaceuticals, according to an analysis by PricewaterhouseCoopers Health Research Institute. 

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