July 16, 2018
In 2018, more than 44 million seniors and people with disabilities are expected to be enrolled in Medicare Part D. The national average premium in 2018 is $35.02, only $2.60 higher than the national average premium in 2014 (representing less than 2% per year increase). One of the major contributors to holding premiums relatively flat over the last five years are manufacture rebates. Manufacturer rebates are price concessions provided by drug manufacturers to health plans to promote use of their medications. These price concessions are distributed to all Part D enrollees indirectly through lower Part D cost-sharing at the point-of-sale and lower premiums.
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Some policymakers and other stakeholders have raised questions about the use of rebates as a method for reducing prescription drug costs. Some have questioned whether the safe harbors from the federal Anti-kickback Statute (AKS) should be revised so that rebates no longer automatically avoid AKS scrutiny. Specifically, some policymakers have expressed support for ending rebates and devising another system for negotiating price concessions.
The Pharmaceutical Care Management Association (PCMA) engaged Oliver Wyman Actuarial Consulting, Inc. to estimate what Medicare Part D premiums would have been absent manufacturer rebates. The major findings of the study are:
- Part D plan-negotiated manufacturer rebates have resulted in $34.9 billion in beneficiary premium savings for enrollees from 2014 to 2018.
- In 2017, the average Part D monthly premium of $35.63 would have been 45 percent, or $16.07, higher without rebates.
- In 2018, the average Part D monthly premium of $35.03 would have been 52 percent, or $18.36, higher without rebates.
- On an annual basis, the 2018 Part D premium would have increased from $420.24 to $640.56 without rebates.