WASHINGTON — Sen. Chuck Grassley is asking the top administrator of Medicare for insight into an alarming increase in spending under the Medicare catastrophic prescription drug program, including whether drug companies might be exploiting the benefit.
“Overall, these escalating expenditures are cause for serious concern and should prompt questions regarding the potential causes,” Grassley wrote to Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services. “Given the increasing costs and the need to ensure that the Medicare benefit, particularly catastrophic coverage, is being appropriately utilized and free from exploitation, it is important to understand the Administration’s approach to solving these problems.”
Grassley asked what factors the agency believes are contributing to this drastic increase in spending; whether the agency believes “there is potential for exploitation of the catastrophic benefit as it is currently framed” and if so, how; and what steps the Administration is taking “to eliminate or lessen the explosive costs and any possible exploitation of the catastrophic benefit” and if no steps are being taken, an explanation of why not.
Grassley based his inquiry on Medicare data sought and reported on by the Associated Press. Spending for prescription drugs under the program’s catastrophic protection increased by 85 percent in three years, from $27.7 billion in 2013 to $51.3 billion in 2015. Certain drugs saw dramatic increases. The cost for catastrophic spending for Harvoni and Sovaldi for hepatitis C in 2014 was $3.5 billion, a figure that increased to nearly $7.5 billion in 2015.
The catastrophic drug benefit under Medicare Part D is meant to cover costs for beneficiaries with chronic conditions who quickly rack up high drug expenses. The coverage kicks in after beneficiaries spend $4,850 out of pocket. After that, taxpayers pay for 80 percent of the cost of medications. The beneficiary pays 5 percent, and insurers pay the remaining 15 percent
Grassley is concerned that the spending might become unsustainable. “That would be devastating for those who rely on this program and for the taxpayer who picks up 80 percent of the bill,” Grassley said. “Those who depend on life-saving prescription drugs should have the benefit of allowing the marketplace to work to bring down costs. It may be that some drug companies are taking advantage of government programs to maximize their market share, and we need to know whether that’s the case.”
Grassley has a strong record of examining high prescription drug costs, especially when marketplace constraints work against consumers on pricing.
In December 2015, Grassley and Sen. Ron Wyden released a report, “The Price of Sovaldi and Its Impact on the U.S. Health Care System,” examining how Gilead Sciences, Inc. developed, priced, marketed and sold the hepatitis C drug, Sovaldi, and its follow-on drug, Harvoni.
In the Judiciary Committee, which he chairs, Grassley is the co-author of bipartisan legislation, the Preserve Access to Affordable Generics Act, that would help put an end to pay-for-delay settlements between brand name pharmaceutical companies and generic companies that block consumers’ access to lower-cost generics.
Grassley also is a lead co-sponsor of the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act to deter brand name pharmaceutical companies from blocking cheaper generic alternatives from entering the marketplace.
Grassley’s letter on the catastrophic drug benefit cost increases is available here.
