Medicare: High-Expenditure Part B Drugs

What GAO Found

In 2010, the 55 highest-expenditure Part B drugs represented $16.9 billion in spending, or about 85 percent of all Medicare spending on Part B drugs, which totaled $19.5 billion. The number of Medicare beneficiaries who received each of these drugs varied from 15.2 million receiving the influenza vaccines to 660 hemophilia A patients receiving a group of biologicals known collectively as factor viii recombinant, which had the largest average annual cost per beneficiary--$217,000. Our analysis showed that most of the 55 drugs increased in expenditures, prices, and average annual cost per beneficiary from 2008 to 2010. The 5 drugs with the largest increase in Medicare expenditures over this time period also had the largest increase in the number of beneficiaries receiving each drug. Four of the 10 drugs which showed the greatest increase in expenditures were also among the 10 drugs showing the greatest price increases.

Spending on Medicare beneficiaries accounted for the majority of estimated total U.S. spending for 35 of the 55 highest-expenditure Part B drugs in 2010. For 17 of the 35, Medicare spending accounted for more than two-thirds of total U.S. spending, defined as spending by the insured population in the United States.

Why GAO Did This Study

In 2010, the Medicare program and its beneficiaries spent about $19.5 billion on Part B drugs--drugs that are commonly administered by a physician or under a physician's close supervision in physicians' offices and hospital outpatient departments. Some of these drugs are particularly expensive for Medicare, either because they are used by a large number of beneficiaries or because their prices are high. These drugs generally differ from drugs beneficiaries obtain through Medicare Part D, which are usually self-administered and for which Medicare, its beneficiaries, and the states spent $61.7 billion in 2010.

Medicare bases its payments for most Part B drugs on the average sales price (ASP), which is calculated from data that manufacturers report quarterly to the Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services that administers Medicare. ASP is the average price, after rebates and discounts, of all sales of a specified drug in the United States; consequently, Medicare's payment rates for Part B drugs are based on prices set by the private market.

Congress asked us to analyze trends in utilization and expenditures for high-expenditure Part B drugs and to estimate Medicare's proportion of total U.S. expenditures for these high-expenditure drugs. This report examines (1) the Part B drugs for which Medicare expenditures were highest in 2010 and the utilization and spending trends for these high-expenditure Part B drugs from 2008 to 2010, and (2) nationwide spending levels for the total U.S. population for these high-expenditure Part B drugs in 2010 and Medicare's percentage of total U.S. spending.

For information, contact James C. Cosgrove at (202) 512-7114 or cosgrovej@gao.gov.