Medicare Part D Drug Costs

  1. Medicare Part D covers about 1,800 generic types of drugs and spends about $150 billion a year.
  2. A drug used to manage type II diabetes is the costliest drug to Medicare Part D ($4.5B/year).
  3. Only 10 of the 1,800 drugs are make up about 20% of all of Medicare Part D costs.

Medicare, which is managed by the Centers for Medicare and Medicaid Services (CMS), is a U.S. federal health insurance program for the elderly, disabled, or individuals with certain diseases (like end-stage renal disease, or “ESRD”). Medicare helps cover payments for medical procedures, prescriptions, and other health-related expenses. For transparency, the Centers for Medicare and Medicaid Services releases annual statistics pertaining to Medicare services.


Check out this related RELATED POST: Insulin Medicare Part D Costs Per State; BILLIONS spent on insulin alone!


One of the reports the Centers for Medicare and Medicaid Services releases pertains to claims and costs associated with the Medicare Part D program, which is an optional Medicare service covering the prescriptions costs for individuals covered by Medicare. Notably, Medicare Part D has about $150 billion in expenses per year for over 1,700 types of drugs. The granularity of the data is quite spectacular: anyone can look up claims and cost data pertaining to any provider within the United States who ever billed Medicare Part D. This includes individual doctors or even gigantic hospitals.

While many researchers have inspected the Medicare Part D data set for detecting fraudulent Medicare claims, the Medicare Part D data is also a treasure trove of information on examining healthcare prescription drug costs across the United States. While the data is very granular, I analyzed the data from a high-level approach by just examining the drugs responsible for the highest expenses for the Medicare Part D program.

While Medicare Part D does cover both private and generic brands, for this analysis I aggregated drug types by their generic name for sake of simplification. From there, I looked a the top 10 drugs responsible for the highest expenses for Medicare Part D. The top 10 drugs are: Insulin Glargine, Ledipasvir/Sofosbuvir, Rosuvastatin Calcium, Lenalidomide, Fluticasone/Salimeterol, Sitagliptin Phosphate, Adalimumab, Tiotropium Bromide, Pregabalin, and Rivaroxaban.

Since most people have zero clinical experience and don’t know what these actual drugs are, I looked up the general uses for each drug (see below). Interestingly, 2 of these drugs are related to diabetes (Insulin Glargine and Sitagliptin Phosphate), 2 of these drugs are related to COPD (Fluticasone/Salimeterol and Tiotropium Bromide) and 2 of these drugs are related to epilepsy (Pregabalin, and Rivaroxaban). The two diabetes drugs alone accounted for about $10 billion in claims, while the COPD drugs were almost $5 billion, and the epilepsy drugs about $4 billion. Note that these costs are for these drugs only and not necessarily in relation to an actual condition!

Because I noticed that the costs for these top 10 drugs were so high, I then analyzed the data to examine what proportion of overall Medicare Part D costs were associated with the highest cost drugs. The top 10 drugs listed above were responsible for almost 20% of all Medicare Part D expenses alone. This is a high proportion of the cost considering that there are 1,774 unique drugs shown in the Medicare Part D Data: drugs accounting for 0.005% of all types of drugs accounted for 20% of costs! I then continued to examine the proportion of costs for the highest expense drugs: the top 25 drugs accounted for 36% of all costs, the top 50 drugs accounted for almost 50% of all costs, and the top 100 drugs comprised of 64% of all Medicare Part D costs.

Notes

  1. I'm not a clinical expert, so the graph showing the conditions associated for the top 10 drugs may not be entirely accurate. I used medical websites to tell me what drug is used for what condition. I'm sure I made an error somewhere.

Extra Stuff

  1. Click here to visit the CMS data download.

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