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Medicare shares private-sector problem: soaring prescription drug costs

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The Medicare program, much like the private sector, is seeing its costs soar for prescription drugs, especially for individuals who require expensive medications to treat medical conditions.

Research released earlier this week by the Centers for Medicare and Medicaid Services' Office of the Actuary finds a double-digit increase in catastrophic coverage of prescription expenses, which begins after beneficiaries have spent $4,850 of their own money.

In 2015, Medicare paid out $51.3 billion for coverage of catastrophic prescription expenses, a 28.7% jump from 2014 and an 85.4% surge compared with 2013, according to the Office of the Actuary.

Prescription drugs used to treat people with hepatitis C accounted for a big chunk of Medicare catastrophic coverage expenses. For example, Medicare in 2015, paid out nearly $6.3 billion in catastrophic expenses for those taking hepatitis-fighting drug Harvoni and $1.2 billion for Sovaldi (see chart).


Prescription drugs that have resulted in major increases in catastrophic costs for Medicare in 2015

• Harvoni, hepatitis C, $6.28 billion

• Revlimid, blood cancer, $1.71 billion

• Sovaldi, hepatitis C, $1.21 billion

• Copaxone, multiple sclerosis, $1.14 billion

• Gleevec, various cancers, $1.02 billion

Source: Office of the Actuary, Centers for Medicare and Medicaid Services


Some benefit experts are baffled about soaring prescription drug costs.

“I see drugs that have been around for decades suddenly increase 500% in a two-year period. The explanation of research and development cost makes no sense,” said James Gelfand, senior vice president of health care policy at the ERISA Industry Committee in Washington.

Prescription drug costs in the private sector also have soared. For example, Milliman Inc. said earlier this year that prescription drug costs jumped an average of 9.1% in 2016 versus an average 4.7% increase in overall health plan costs for employers.

“The current pricing models a‎re unsustainable and unaffordable,” said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington.

The issue has caught the attention of Democrats and Republicans

For example, GOP presidential nominee Donald Trump wants to make it easier for drug manufacturers outside the United States to export their products here.

“Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers,” Mr. Trump said in a position paper.

Democratic presidential candidate Hillary Clinton also backs the importation of prescription drugs from abroad.

In a position paper, Mrs. Clinton said she “would allow Americans to safely and securely import drugs for personal use from foreign nations whose safety standards are as strong as those in the United States.”