Medicare and its beneficiaries make payments for Part B drugs to  providers, such as physicians and hospitals, which first purchase the  drugs from manufacturers or other sellers. Most High- Expenditure Part B Drugs Had Coupon Programs in 2015; an Estimated 19 Percent of Privately Insured Patients Taking Such Drugs Used Programs in 2013

In 2015, drug manufacturers offered coupon programs to privately insured  patients for 29 of the 50 high-expenditure Medicare Part B drugs in our  analysis. The percentage of these  patients who used a coupon program ranged from 1 to over 90 percent,  depending on the drug, with coupon programs for all but 2 drugs being  used by less than 40 percent of patients. Coupon discounts reported by manufacturers of the 18 drugs totaled  $205 million in 2013. Methodology for Setting Part B Drug Payment Rates May Be Less Suitable for Drugs with Coupon Programs, but CMS Lacks Data to Evaluate Methodology

		Payment Rate Methodology for Part B Drugs May Be Less Suitable for Drugs with Coupon Programs because Medicare’s Average Sales Price Exceeds Effective Market Price

Medicare’s market-based methodology for setting Part B drug payment  rates may be less suitable for drugs with coupon programs than for other  Part B drugs that are paid based on ASP. Because ASP does not account  for coupon discounts between manufacturers and patients, the ultimate  consumers of these drugs, the ASP for drugs with coupons exceeds the  effective market price a manufacturer receives for a drug purchase. We estimated that, for the 18 drugs for which we obtained coupon  discount data in 2013, ASP exceeded the effective market price by an  average of 0.7 percent. ASP exceeded the effective  market price for some drugs by much more than the 0.7 percent average,  which suggests that the ASP-based payment method may be even less  suitable for these drugs. 2). Part B spending for these 5 drugs combined could have been an  estimated $50 million lower if ASP equaled the effective market price. In addition, to the extent that drug  prices continue to increase and translate into higher out-of-pocket costs  for privately insured patients, this could increase patients’ use of drug  coupons and the discount amounts they receive. Furthermore, upward trends in coupon program use and drug prices  suggest that Medicare’s Part B drug payment rate methodology could  become less suitable over time for drugs with coupon programs. However, the agency lacks the  authority to collect data on coupon discounts and therefore lacks  important information that could inform its ongoing efforts to design and  evaluate alternative approaches. Matter for Congressional Consideration

To determine the suitability of Medicare’s Part B drug payment rate  methodology for drugs with coupon programs, Congress should consider granting CMS the authority to collect data from drug manufacturers on  coupon discounts for Part B drugs paid based on ASP and  requiring the agency to periodically collect these data and report on  the implications that coupon programs may have for this methodology. HHS provided us with  technical comments, which we incorporated as appropriate. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Health and Human Services,  and the Administrator of the Centers for Medicare & Medicaid Services. Identifying Coupon Programs Associated with High-Expenditure Medicare Part B Drugs and Describing Use among the Privately Insured

To identify coupon programs associated with high-expenditure Medicare  Part B drugs, we used 2013 Medicare claims data—the most recent full  year of data available at the time we began our analysis (2015)—to  develop a list of the 50 highest-expenditure Part B drugs paid based on  the average sales price (ASP) methodology. In addition to data on coupon use, we collected information from  manufacturers on the mechanisms through which manufacturers provide  coupon discounts to patients and on the ways in which manufacturers  inform patients and providers about drug coupon programs.
Why GAO Did This Study

Use of drug coupons in the private sector has increased in recent years. GAO was asked to study coupon programs for drugs covered by Medicare Part B, including any implications for Part B spending.
This report (1) identifies coupon programs associated with high-expenditure Part B drugs and describes the extent to which privately insured patients use coupons and (2) examines, for drugs with coupon programs, the suitability of the Part B drug payment rate methodology. GAO identified high-expenditure Part B drugs using 2013 Medicare claims data—the latest available at the time of the analysis—and collected information from manufacturers on coupon program characteristics in 2015. GAO also analyzed coupon use and patient costs for drugs using 2013 data from manufacturers and private insurers; estimated how Part B spending could have differed if ASP had accounted for coupon discounts in 2013; reviewed federal laws and regulations; and interviewed CMS officials.

What GAO Found

In 2015, manufacturers of 29 of the 50 high-expenditure Medicare Part B drugs GAO analyzed offered coupon programs, which reduce the costs patients incur for specific drugs. Part B drugs are typically administered by a physician. Coupon programs are prohibited in the Medicare program but are generally available to privately insured patients. GAO obtained data on coupon discounts for 18 drugs. GAO estimated that 19 percent of privately insured patients who received these drugs used coupons in 2013, but coupon use varied widely depending on the drug—from 1 percent to over 90 percent.
Medicare's methodology for setting Part B payment rates to providers may be less suitable for drugs with coupon programs than for drugs without them. The methodology for most Part B drugs is based on the average sales price (ASP), which is defined by law as the amount physicians and other purchasers pay manufacturers for the drug, net of discounts and rebates to those purchasers. Medicare and its beneficiaries spent $20 billion on Part B drugs paid based on ASP in 2013. As ASP does not account for coupon discounts to patients, the discounts reduce the effective market price that manufacturers receive for drugs with coupon programs. GAO estimated that, for the 18 drugs for which it obtained coupon discount data, the ASP exceeded the effective market price by an estimated 0.7 percent in 2013. Part B spending for these drugs could have been an estimated $69 million lower if ASP equaled the effective market price. ASP exceeded the effective market price by more than 1.0 percent for 5 of the 18 drugs, suggesting that the ASP-based methodology may be even less suitable for these drugs.
Upward trends in coupon program use and drug prices suggest that these programs could cause the methodology for setting Part B drug payment rates to become less suitable over time for drugs with coupon programs. However, the Centers for Medicare & Medicaid Services (CMS) lacks the authority to collect coupon discount data from manufacturers and thus lacks important information that could inform its ongoing efforts to evaluate alternatives to this methodology.

What GAO Recommends

To determine the suitability of the Part B drug payment rate methodology for drugs with coupon programs, Congress should consider (1) granting CMS authority to collect data from drug manufacturers on coupon discounts for Part B drugs paid based on ASP; and (2) requiring CMS to periodically collect these data and report on the implications of coupon programs for this methodology. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.