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United States Government Accountability Office (GAO) Report on Prescription Drugs
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United States Government Accountability Office (GAO) Report on Prescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices


GAO-14-578

SUMMARY


The Government Accountability Office (GAO) recently released a report comparing prescription drug retail reimbursement prices paid by DOD, Medicaid, and Medicare Part D. Click here to read the entire GAO report.

REQUESTED BY
The report was requested by the Ranking Member of the Senate Committee on Homeland Security and Government Affairs, Senator Tom Coburn, based on the fact that in 2011, federal spending for prescription drugs by DOD, Medicaid and Medicare Part D totaled $71.2 billion for about 114.4 million beneficiaries. This total represents about 85 percent of all federal prescription drug expenditures.

PROCEDURE
To conduct the report, GAO selected a sample of 50 high-utilization and 50 high-expenditure drugs. Due to overlap, the final sample used consisted of 78 drugs. GAO calculated average gross unit prices paid to pharmacies by each program by adding total program-paid and beneficiary-paid amounts and dividing by total utilization for each drug, the entire sample, and the subsets of brand-name and generic drugs. GAO then calculated net unit prices paid by each program by subtracting all agency-reported beneficiary-paid amounts, rebates, refunds, and other price concessions from the gross unit prices.

FINDINGS
Across the board, Medicaid paid the lowest average net prices due to what GAO concluded as differences in post-purchase price adjustments. For example, Medicaid’s federally mandated rebates apply to almost all drugs where as DOD’s refunds only apply to certain drugs. Medicare Part D obtained the lowest per-unit price adjustments among the three programs since unlike DOD and Medicaid that are able to collect specific refunds and rebates under statutory language, Medicare Part D plan sponsors generally rely on independent negotiations to obtain price concessions from drug manufacturers.

•    Medicaid paid the lowest average net prices across a sample of 78 high-utilization and high-expenditure brand-name and generic drugs.
o    Medicaid’s average net price for the entire sample was $0.62 per unit.
o    Medicare Part D paid an estimated 32 percent more or $0.82 per unit.
o    DOD paid 60 percent more or $0.99 per unit.

•    Medicaid paid the lowest net price for the subset of brand-name drugs in the sample.
o    Medicaid paid an estimated $1.57 per unit.
o    DOD paid 34 percent more at $2.11 per unit.
o    Medicare Part D paid an estimated 69 percent more at $2.65 per unit.

•    Medicaid paid the lowest net price for the subset of generic drugs.
o    Medicaid paid $0.28 per unit.
o    Medicare Part D paid 4 percent more at $0.29 per unit.
o    DOD paid 50 percent more at $0.42 per unit.

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