A new analysis by the Kaiser Family Foundation (KFF) has revealed that despite comprising only 0.3% of total covered drugs, the top 10 best-selling Medicare Part D drugs accounted for 22% of total gross Medicare drug spending in 2021. The findings offer important context for understanding the potential impact of the Medicare Drug Price Negotiation Program, which was created by the Inflation Reduction Act and allows the federal government to negotiate the prices of certain high-spending drugs covered by Medicare Part D and Part B.
Under the program, the Centers for Medicare and Medicaid Services (CMS) will select 10 Part D drugs for negotiation in 2026, with the specific drugs being announced on September 1, 2023. Additional drugs will be progressively added to the list in the future. The KFF analysis is based on CMS data on Medicare Part D spending by drug, although it does not identify which drugs are likely to be subject to negotiation for 2026, as it does not take into account all the factors that determine eligibility for negotiation or have access to the most current spending data that CMS will use.
The analysis found that the top 10 Part D drugs represented $47.7 billion of the total gross Medicare Part D drug spending of $215.7 billion in 2021. Eliquis, a blood thinner manufactured by Bristol Myers Squibb, accounted for the highest spending among these drugs at $12.6 billion. Five of the top-selling drugs were diabetes drugs, including Trulicity, Januvia, Jardiance, Lantus Solostar, and Ozempic. The remaining drugs were Revlimid, Xarelto, Imbruvica, and Humira Citrate-free pen.
Furthermore, the analysis revealed that gross Medicare spending for the top 10 drugs more than doubled from $22 billion in 2018 to $48 billion in 2021. This increase in spending on these 10 drugs accounted for more than half of the overall increase in gross Medicare spending on all covered Part D drugs during that period.
To be eligible for the price negotiation program, small-molecule drugs must have received FDA approval at least seven years before the announcement of the selected drugs, while biologics require 11 years of FDA approval. Additionally, the drugs cannot have therapeutically-equivalent generic or biosimilar alternatives. Therefore, Trulicity, Ozempic, Revlimid, Humira, and Lantus are excluded from the program.
The findings of the analysis suggest that targeting price negotiation on a small number of high-spending drugs could have a significant impact on Medicare drug spending in the future. While not all of the top 10 Part D drugs in 2021 will be included in the list of drugs selected for negotiation this year, the analysis indicates that a focused approach to negotiation could potentially affect a disproportionate share of Medicare drug spending.
Overall, the KFF analysis sheds light on the significant role played by a small number of top-selling Medicare Part D drugs in driving Medicare drug spending. It underscores the potential impact of the Medicare Drug Price Negotiation Program and highlights the importance of targeted negotiation strategies to address the rising costs of these high-spending drugs.
