Drug prices on the rise as coverage gap looms

With 2010 well under way, Medicare beneficiaries participating in Part D plans face increasing drug prices for which they will have to pay 100 percent of total drug costs after their spending exceeds the initial coverage limit, according to a new report from the Kaiser Family Foundation. It should be noted, though, that the new health reform law makes changes to the coverage gap beginning in 2010, with a $250 payment to anyone who reaches the “doughnut hole.”

It is expected that these increases in drug prices will far exceed the growth of inflation. But Juliette Cubanski, principal policy analyst at Kaiser, cautions that the environment is too unpredictable, especially with drug prices.

She says, “If history is any guide, price increases are more likely than not for brand-name drugs — but the extent of that increase is not within the scope of our research.”

Under current law, the coverage gap under the Part D standard benefit is $3,610 in 2010 and is projected to increase to $5,755 by 2018. In 2007, an estimated 3.4 million Part D enrollees reached the coverage gap.

Between 2009 and 2010, monthly prices in the coverage gap increased by 5 percent or more for half of the top ten brand-name drugs that did not have a generic substitute for enrollees in stand-alone prescription drug plans (PDPs) — whereas the Consumer Price Index for urban consumers (CPI-U) increased by 2.7 percent and the CPI for medical care (CPI-M) increased by 3.5 percent.

Prices for top ten brand-name drugs in national PDPs, 2009–2010

Source: Kaiser Family Foundation. Prices for brand-name drugs in the coverage gap. March 2010

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