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Medicare Part B Drug Spending

Medicare Part B Drugs: Trends in Spending and Utilization, 2008-2021

The U.S. Department of Health and Human Services (HHS), Office of the Assistant Secretary for Planning and Evaluation (ASPE) released new research on spending and utilization trends of Medicare Part B drugs, drugs administered in physicians' office or hospital outpatient departments rather than being purchased at the pharmacy counter or by mail order. The report showed that Medicare Part B drugs had the fastest rate of spending growth among drugs in the Medicare program over the past few decades. Part B drug spending per enrollee in traditional Medicare (known as fee-for-service or FFS) grew on average at 9.2 percent annually over the 2008-2021 period. This spending growth was more than triple the rate in Part D (2.6 percent) and nearly 4 times as high as the rate of per capita annual prescription drug spending across all payers (2.4 percent) reflected in the National Health.

Medicare Part B Drugs: Trends in Spending and Utilization, 2006-2017

Medicare covers prescription drugs provided during inpatient hospital and skilled nursing facility stays through Part A, retail prescription drugs through Part D, and drugs provided in physicians’ offices and hospital outpatient departments through Part B. Over the 2006-17 period, Medicare FFS Part B drugs spending per enrollee grew at 8.1 percent annually. This spending growth is more than twice as high as Part D (per enrollee annual spending growth of 3.4 percent) and nearly three times as high as the nation overall (per capita annual spending growth of 2.9 percent for the National Health Expenditures (NHE) retail drug spending). The paper presents data on Part B drug spending and utilization; describes the current pricing system and discusses the system’s financial incentives that could help explain the underlying rising trends in spending. It also describes new policy initiatives that have been proposed or implemented since March of 2016.

An Earlier Version of this Paper:

Medicare FFS Part B and International Drug Prices: A Comparison of the Top 50 Drugs

The September 13, 2020 Executive Order on Lowering Drug Prices by Putting America First declared, “It is the policy of the United States that the Medicare program should not pay more for costly Part B or Part D prescription drugs or biological products than the most-favored-nation price.” The Most Favored Nation (MFN) Model issued by the Centers for Medicare & Medicaid Services (CMS) on November 20, 2020 implements such an approach for Medicare Part B. This Issue Brief compares what Medicare pays for prescription drugs in Part B with prices in the other industrialized countries that, like the U.S., are members of the Organisation for Economic Co-operation and Development (OECD).

A Previous Paper on this Topic: