GAO: Medicare Part D Pays Twice As Much for Same Drugs as VA

WASHINGTON, January 14 — The federal government pays twice as much for the same prescription drugs when reimbursing private-sector middlemen in Medicare Part D as it does when buying the drugs directly through the Department of Veterans Affairs (VA) single-payer drug plan, according to a report released today by the Government Accountability Office (GAO).

The report, “Department of Veterans Affairs Paid About Half as Much as Medicare Part D for Selected Drugs in 2017,” commissioned by Sen. Bernie Sanders (I-Vt.), found that in 2017, on average, the VA paid 54 percent less per unit for a sample of 399 brand name and generic prescription drugs in 2017 than Medicare Part D.

Of the 399 drugs, 233 were at least 50 percent cheaper when purchased by the VA rather than Medicare Part D, and 106 were at least 75 percent cheaper. Moreover, according to GAO, VA generally uses less-expensive alternatives. For generic drugs, VA paid, on average, 48 percent less than did Medicare for the same drugs. For brand name drugs, VA paid 49 percent less.

“There is absolutely no reason, other than greed, for Medicare to pay twice as much for the same exact prescription drugs as the VA.  If the VA can negotiate with the pharmaceutical companies to substantially reduce the price of prescription drugs we must empower Medicare to do so as well,” said Sanders. “We can no longer allow the pharmaceutical industry to rip-off the more than 40 million people who receive prescription drug coverage through Medicare Part D and fleece U.S. taxpayers. It is time for Congress to require Medicare to negotiate lower drug prices and take on the greed pharmaceutical industry.”

In 2017, Medicare Part D covered 42.5 million individuals and had an estimated $93.9 billion in expenditures, while the much-smaller VA provided prescription drug coverage for approximately 9 million enrolled veterans and spent about $4.8 billion for prescription drugs in outpatient care.

The report identified several reasons for the large price disparity. Among them:

–     VA is a single health system with a unified list of covered drugs, whereas Medicare beneficiaries are covered by many different Part D plans, each of which separately negotiates with manufacturers. In December 2017, the largest plan had approximately 5.6 million enrollees, while most were much smaller; meanwhile, VA’s single, unified plan represented 9 million individuals. This led GAO to conclude, “VA’s large purchasing volume may strengthen its bargaining position when negotiating.”

–    VA has access to statutory discounts on its drug purchases, which are not available to Part D plans. These include additional discounts if drug prices rise faster than general inflation, as is often the case. In contrast, the law establishing Medicare Part D explicitly prohibits the Department of Health and Human Services from negotiating drug prices on behalf of Part D plans.

In the last Congress, Sen. Sanders sponsored S.99, the Medicare Drug Price Negotiation Act, which directs the Secretary of Health and Human Services to negotiate drug prices on behalf of Medicare Part D plans.

Read the report here.