At the request of Congress and others, the Office of Inspector General (OIG) conducted a review of “high-priced drugs” (defined by OIG as exceeding $1,000 per month) and their impact on the Medicare program. The OIG found that 2015 federal payments for Part D catastrophic coverage, which is triggered when a beneficiary’s out-of-pocket costs exceed a certain amount, were in excess of $33 billion, more than three times the amount spent in 2010. Ten high-priced drugs, used to treat conditions such as hepatitis C, cancer and multiple sclerosis, accounted for almost two-thirds of the total drug spending in catastrophic coverage. Four of the drugs were new since 2010, while the others had been on the market since then and experienced price increases. The average prices for these drugs ranged from $1,200 to almost $34,000 per month, which in addition to impacting Medicare payments also leads to high out-of-pocket costs for some Medicare beneficiaries.

The OIG concluded that continued growth at this pace could present a risk to the sustainability of Part D, and that ensuring beneficiary access is a complex issue requiring a multifaceted approach. OIG recommended that CMS consider several options to address the issue, including creating more transparency regarding drug pricing, promoting value-based options, and amending laws to allow the federal government to negotiate pricing for certain drugs. The OIG noted that CMS has taken some actions in response to these increased drug prices, including asking industry to partner with it to address these costs, while providing for innovation.