IMS Institute Part D Paper

IMS Institute Part D Paper

07.15.11 | By Kate Connors

New research, released today by the IMS Institute for Healthcare Informatics, affirms what we've been saying for awhile now: The average costs for medicines frequently used by Medicare Part D beneficiaries have declined significantly since the implementation of the program.

Specifically, the report -- "Medicare Part D at Age Five: What Has Happened to Seniors' Prescription Drug Prices?," -- finds that the average costs for medicines in the top 10 therapeutic classes in Part D declined by approximately a third between January 2006 and December 2010, from $1.50 to $1.00. Furthermore, the IMS Institute projects that costs will continue to decline, reaching $0.65 by the end of 2015. That would be a 57 percent decrease from 2006.

The data are important but the report also illustrates the nature of the biopharmaceutical market, in which savings are possible because innovator biopharmaceutical companies produce medical advances through pioneering scientific work and large-scale investments which lead, over time, to generic copies that consumers use at low cost for many years. The competitive, market-based structure of Part D has promoted the accelerated adoption of generic drugs by seniors as prescription drug plans compete to maximize these savings from the prescription medicine lifecycle. This leads to lower costs for the program and for beneficiaries.

While the report does not address any specific policy proposals, it does reinforce the success of the Part D program. In Part D, private plans have strong incentives to achieve savings. In fact, according to the Medicare Trustees, plans negotiate rebates as high as 20-30 percent on branded medicines. Passing these savings on to beneficiaries has contributed to the program's success in holding costs far below projections, while achieving very high marks from seniors. Government-imposed, centralized rebates could risk the success of the Medicare Part D program.

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