GAO Report Reveals Higher Medicare Prices Tied to Drug Coupon Discount Programs

The U.S. Government Accounting Office (GAO) recently released a report on the effect of drug coupon discount programs upon the Medicare Part B drug payment system.  The Medicare Part B: Data on Coupon Discounts Needed to Evaluate Methodology for Setting Drug Payment Rates report found Medicare Part B expenditures were $69 million higher for 18 drugs also made available to privately-insured patients with access to drug coupon discounts.  For example, in 2013, Medicare expended $1,515,000,000 on Rituxan, which is manufactured by Genentech.  35% of patients taking Rituxan have an average annual out-of-pocket cost of $1,262.  Genentech offers annual discounts of up to $25,000 to a hematology patient and up to $10,000 for a rheumatoid arthritis patient.  Medicare uses the “average sales price” (ASP) to set Part B payment rates to providers. [See 42 CFR 414.904]  The ASP is based upon manufacturer sales information, including various discounts, but it does not take into account drug coupon discounts.  Thus, the ASP exceeds the effective market price of drugs also made available with such discount programs.  The U.S. Centers for Medicare & Medicaid Services (CMS) currently does not have the authority to collect data from drug manufacturers on patient coupon discounts.  The GAO report recommends that Congress give such authority to the CMS, as well as require the CMS to regularly report on the implications of coupon discount programs on the ASP.  For additional information, see the GAO Data on Coupon Discounts Needed to Evaluate Methodology for Setting Drug Payment Rates report page.