A decade of increases in Medicare Part B pharmaceutical spending: what are the drivers?

Medicare Part B pharmaceutical spending has increased rapidly, more than doubling in 2006-2017. Yet, it is unclear whether this increase was driven by increased utilization or increased cost per claim. To evaluate the relative impact of changes in drug utilization and cost per claim on changes in Medicare Part B pharmaceutical spending in 2008-2016 overall, by drug type (specialty and nonspecialty) and therapeutic category. In this retrospective descriptive study, we extracted all claims in 2008-2016 for separately payable Part B drugs from a 5% random sample of Medicare beneficiaries. Our study included 3 outcomes calculated annually for all included drugs: (1) spending, defined as the sum of total payments; (2) utilization, defined as total number of claims; and (3) cost per claim, defined as spending divided by the number of claims. Estimates of spending and utilization were expressed per beneficiary-year. Spending and cost per claim were adjusted for inflation. For each outcome, we calculated relative changes in 2008-2016. We repeated analyses stratifying by drug type (specialty and nonspecialty) and therapeutic class. Pharmaceutical spending in Medicare Part B increased by 34% from 2008-2016, driven by a 53% increase in the cost per claim. Utilization decreased by 12%. Spending on specialty drugs increased by 56%, driven by a 48% increase in the cost per claim and a 6% utilization increase. Spending on nonspecialty drugs decreased by 32% driven by an 18% reduction in the cost per claim and a 17% reduction in utilization. Spending on ophthalmic preparations increased by 281%, driven by a 238% utilization increase and a 13% increase in the cost per claim. Spending on antiarthritic and immunologic agents increased by 159%, driven by a 117% increase in the cost per claim and a 19% utilization increase. Medicare Part B pharmaceutical spending grew in recent years, despite decreased utilization, driven by an overall increase in the cost per claim. This was a product of rising drug prices and increased utilization of more expensive specialty drugs. These findings support the development of policies that aim to spur competition and control price growth of provider-administered drugs. The authors acknowledge funding from the Myers Family Foundation. Hernandez was funded by the National Heart, Lung and Blood Institute (grant number K01HL142847). Shrank is an employee of Humana. Good is an employee of the UPMC Health Plan Insurance Services Division. There are no other potential conflicts of interest to disclose.