Data Brief  U.S. Department of Health & Human Services 
June 2018 
Office  of Inspector General 
OEI-03-15-00080 
 
 
Increases in Reimbursement for Brand-Name 
Why OIG Did This Review 
Drugs in Part D  
Recent increases in prescription drug 
prices have drawn the attention of 
What OIG Found 
Congress, made headlines in major media 
  Total reimbursement for all brand-name drugs in Part D increased  outlets, and raised concerns in 
77 percent from 2011 to 2015, despite a 17-percent decrease in the  Government agencies that reimburse for 
number of prescriptions for these drugs.    these drugs.  Some studies also have 
shown that certain therapeutic classes of 
  After accounting for manufacturer rebates, reimbursement for 
drugsi.e., groups of drugs that treat 
brand-name drugs in Part D still increased 62 percent from 2011 to 
specific conditions such as diabetes and 
2015.   
heart diseaseare becoming more 
  Part D unit costs for brand-name drugs rose nearly 6 times faster than  expensive.  Drugs in these therapeutic 
inflation from 2011 to 2015.    classes are typically maintenance drugs, 
which means they are usually prescribed 
  The percentage of beneficiaries responsible for out-of-pocket costs of 
for chronic conditions.  Therefore, 
at least $2,000 per year for brand-name drugs nearly doubled across 
increasing costs for these drugs may have 
the 5-year span.    a long-term financial impact on Part D and 
its beneficiaries. 
  Exhibit 1: Total reimbursement for brand-name drugs in Part D 
increased as utilization for these drugs declined from 2011 to 2015  How OIG Did This Review 
 
   ment in billions   $$$$1102680000 112226040000 Prescriptions in TrPbeevhaeierimnstne  bdDtf iuarc mertiaascaer obiymerr dsbiee.s enf ,  W tiea .efxfeof.ae, r umcp bstrieirnenadsegnc s pdr Mhir-peonetsiwdacomir nciinpase,crt  eidrtoeo ranau np sgddersros  uii vtnigsind    e 
se $40 80  m
  mbur $20 40 illion aann da nuatillyizsaist ioofn r cehimanbguersse fmore bnrt aanmdo-nuanmtse  
  Rei $0 0 s  drugs in Part D from 2011 to 2015.  We also 
2011 2012 2013 2014 2015 examined the impact of manufacturer 
 
Total reimbursement rebates on total Part D reimbursement 
Total prescriptions across the 5 years.  We compared the 
  annual rate of inflation to changes in 
Source:  OIG analysis of Medicare Part D data, 2011 to 2015. 
Part D unit costs for individual drugs with 
What OIG Concludes  reimbursement in 2 consecutive years.  To 
Our findings show that although there were fewer prescriptions for  control for the possibility that (1) increases 
brand-name drugs in 2015 than in 2011, increases in Part D unit costs for  in utilization or (2) newer, more expensive 
brand-name drugs led to greater overall Medicare Part D spending and higher  brand-name drugs may have driven 
beneficiary out-of-pocket costs for these drugs.  Generally, plan sponsors base  increases in total Part D reimbursement, 
their pharmacy reimbursement amounts on the prices that manufacturers set  we analyzed the number of prescriptions 
and average unit costs for brand-name 
for their drugs.  Therefore, increasing manufacturer prices for brand-name 
drugs that were reimbursed by Part D in 
drugs may result in increasing costs for Medicare and its beneficiaries, 
every year from 2011 to 2015.  Finally, we 
especially those beneficiaries who need access to expensive maintenance 
evaluated beneficiary out-of-pocket costs 
drugs.  
for brand-name drugs in Part D from 2011 
to 2015. 
Full report can be found at oig.hhs.gov/oei/reports/oei-03-15-00080.asp  
  BACKGROUND 
The Medicare Part D Program  
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established 
Medicare Part D to provide an optional prescription drug benefit for Medicare beneficiaries 
beginning January 1, 2006.  Individuals enrolled in Part D can choose to receive benefits 
through stand-alone prescription drug plans (PDPs), or through Medicare Advantage 
prescription drug plans (MA-PDs) that provide integrated medical coverage, including 
drugs.  Part D typically covers a broad range of outpatient drugs, including cardiovascular 
drugs, insulin, antibacterial drugs, and some vaccines. 
The Centers for Medicare & Medicaid Services (CMS) contracts with private companies, 
known as plan sponsors, that offer prescription drug plans to their beneficiaries with 
varying drug coverage and cost-sharing requirements.1  Plan sponsors must submit 
a prescription drug event record to CMS for each covered prescription filled for their 
beneficiaries.  Each record contains the national drug code (NDC),2 the amount paid to the 
pharmacy, and utilization data that enable CMS to administer the Part D benefit.     
Part D Reimbursement Amounts 
Pharmacy reimbursement for Part D drugs is based on negotiations between plan sponsors 
and pharmacies.3  Benchmark prices, e.g., average wholesale prices (AWPs) or wholesale 
acquisition costs (WACs), may serve as the bases for drugs negotiated prices.  A plan 
sponsor (or an entity acting on the plan sponsors behalf) also may negotiate rebates with 
drug manufacturers that reduce Part D drug costs to beneficiaries and the Government.  
Plan sponsors are required to report these rebates to CMS. 
Beneficiary cost-sharing.  The standard Part D drug benefit is divided into phases, with 
beneficiaries moving through each phase as their drug costs increase.  The phases of the 
standard benefit are as follows, in chronological order: deductible, initial coverage, 
coverage gap, and catastrophic coverage.4  Cost-sharing amounts for the Government and 
beneficiaries vary from one phase to another.    
In Part D, beneficiary cost-sharing obligations are collectively known as out-of-pocket 
costs, and may include deductibles, copayments (fixed payment amounts), and 
coinsurance amounts (payments based on a percentage of the drugs cost).  In some cases, 
beneficiaries may receive financial support for these costs from various sources, such as 
 
 
1 Part D sponsors can offer prescription drug coverage under PDP and/or MA-PD contracts.  
2 An NDC is an 11-digit identifier that provides information about the drugs manufacturer, product, and 
package size. 
3 Section 1860D-11(i) of the Social Security Act prohibits the Government from interfering with negotiations 
between drug manufacturers, pharmacies, and plan sponsors. 
4 Beginning in January 2011, beneficiaries drug costs during the coverage gap phase were reduced by 
manufacturer discounts and cost-sharing from the Part D plans.  In 2015, beneficiaries were responsible for 
45 percent of brand-name drug costs during the coverage gap phase.   
Increases in Reimbursement for Brand-Name Drugs in Part D  1 
OEI-03-15-00080  additional insurance or charity care.  Plan sponsors often use tiered cost-sharing, which 
may cause a beneficiarys cost to vary depending on the drugs tier.  For example, plan 
sponsors may place generic drugs, which are generally less expensive, on the first tier and 
brand-name drugs, which tend to be more expensive, on higher tiers.  As a result, 
beneficiaries may pay higher cost-sharing amounts for brand-name drugs than generics.  
For some brand-name drugs, such as those used to treat certain cancers and hepatitis C, 
beneficiary cost-sharing amounts can be thousands of dollars per month.  For expensive 
drugs on the highest tier, CMS allows plan sponsors to charge coinsurance of up to 
33 percent instead of a set copayment amount.  In 2016, nearly all beneficiaries were 
enrolled in Part D plans that included high-cost tiers for the most expensive drugs.5   
Related Work 
A 2017 MedPAC study of drug prices in Part D found that newer, more expensive drugs 
significantly affected overall Part D reimbursement.6  Because beneficiaries who take these 
expensive drugs are more likely to reach the catastrophic-coverage phase of their benefits, 
the Government pays for a greater share of their drug costs.  A 2017 Office of Inspector 
General (OIG) report analyzed Federal payments for catastrophic coverage in Part D, and 
the drugs dispensed in this benefit phase.7  OIG found that Federal payments for 
catastrophic coverage tripled from $10.8 billion in 2010 to $33.2 billion in 2015.  In addition, 
OIG found that 10 high-price drugswhich cost up to $34,000 per monthaccounted for 
nearly one-third of all drug spending for catastrophic coverage in 2015.    
The Part D trends that the MedPAC and OIG reports identified are consistent with a 2016 
issue brief by the Office of the Assistant Secretary for Planning and Evaluation (ASPE) that 
analyzed overall prescription drug spending from 2009 to 2015.8  ASPE reported that 
increases in total prescription drug spending outpaced increases in the number of 
prescriptions over the time period it reviewed.  ASPE suggested that increases in drug 
prices contributed more to the growth in spending than increases in the volume of 
prescriptions. 
Methodology 
Total Part D reimbursement.  We collected prescription drug event records to calculate 
changes in reimbursement and utilization for all brand-name drugs in Part D from 2011 to 
2015.  We considered each 11-digit NDC to be an individual drug9 and each prescription 
drug event record to be one prescription.   
 
5 The Henry J. Kaiser Family Foundation, Medicare Part D in 2016 and Trends over Time.  Accessed at 
http://www.kff.org/medicare/report/medicare-part-d-in-2016-and-trends-over-time/ on August 29, 2017.   
6 MedPAC, Status Report on the Medicare Prescription Drug Program (Part D), ch. 14, March 2017. 
7 OIG, High-Price Drugs are Increasing Federal Payments for Medicare Part D Catastrophic Coverage 
(OEI-02-16-00270), January 2017. 
8 ASPE, Issue Brief:  Observations on Trends in Prescription Drug Spending, March 2016.  Accessed at 
https://aspe.hhs.gov/system/files/pdf/187586/Drugspending.pdf on February 1, 2018. 
9 A particular drug compound may have multiple 11-digit NDCs.  For example, our analysis included 13 NDCs for 
the drug Abilify.  
Increases in Reimbursement for Brand-Name Drugs in Part D  2 
OEI-03-15-00080  Part D rebates.  We collected rebate data for all brand-name drugs in Part D and 
subtracted each drugs total rebates from its total reimbursement each year.  We then 
compared changes in this rebate-adjusted reimbursement for all brand-name drugs in 
Part D across the 5 years.   
Part D unit costs.  We calculated Part D unit costs by dividing total Part D reimbursement 
by the number of units that Part D dispensed for each brand-name drug under review.  
Drug units may include individual tablets, capsules, or milliliters of the drug being 
dispensed.  To control for the possibility that newer, more expensive brand-name drugs 
may have driven increases in total Part D reimbursement, we limited our analysis of average 
unit costs to the 3,578 brand-name drugs that were reimbursed in every year from 2011 to 
2015.  We calculated changes in average unit costs and utilization for these brand-name 
drugs that were reimbursed by Part D in all 5 years under review.   
Inflation rate.  In our comparison of Part D unit costs to the rate of inflation, we determined 
the year-to-year changes in Part D unit costs by selecting all brand-name drugs that were 
reimbursed by Part D in 2 consecutive years under review.  For example, to determine the 
percentage change in unit costs between 2011 and 2012, we used brand-name drugs that 
were reimbursed by Part D in both years and calculated the median percentage change in 
unit costs for these drugs.  We did this year-by-year analysis across the 5-year span and 
compared changes in Part D unit costs to the rate of inflation from 2011 to 2015. 
Benchmark prices.  We obtained WACs from two national drug compendia: Red Book and 
First Databank and we obtained AWPs from the Red Book compendium.  We calculated the 
median percentage changes in AWPs and WACs for brand-name drugs that were 
reimbursed by Part D in 2 consecutive years from 2011 to 2015.  We then compared these 
year-to-year changes in benchmark prices to Part D unit costs and the rate of inflation 
across the 5 years.   
Beneficiary out-of-pocket costs.  Out-of-pocket costs represent beneficiary cost-sharing 
obligations and, in some cases, may not represent payments made directly by beneficiaries.  
To better approximate what beneficiaries may have paid, we removed from our analysis 
any beneficiaries who received third-party assistancee.g., low-income cost-sharing 
subsidies, group health plans, or State Pharmaceutical Assistance Programsto cover their 
cost-sharing obligations.  For the remaining beneficiaries, we calculated total annual 
out-of-pocket costs (based on the patient pay amount) for beneficiaries who had at least 
one prescription for any brand-name drug from 2011 to 2015.   
For brand-name drugs that were reimbursed in all 5 years we reviewed, we determined the 
average out-of-pocket costs for each drug and calculated changes in these amounts from 
2011 to 2015.  Finally, we grouped brand-name drugs into therapeutic classes to determine 
which therapeutic classes had the highest total beneficiary out-of-pocket costs from 2011 to 
2015.   
Appendix A provides a detailed methodology for the evaluation.     
Increases in Reimbursement for Brand-Name Drugs in Part D  3 
OEI-03-15-00080  RESULTS 
From 2011 to 2015, total reimbursement for brand-name drugs 
in Part D increased 77 percent, despite a decrease in utilization 
for these drugs 
Exhibit 2: Reimbursement for brand-name  Total reimbursement for all brand-name 
drugs in Part D increased as utilization for  drugs in Part D increased 77 percent over 
these drugs declined  
the 5 years, from $58 billion in 2011 to 
$120 240
$102 billion in 2015 (see Exhibit 2).10  Overall, 
 
s
on  $100 200 P Part D paid $382 billion for all brand-name 
billi $80 160 resc drugs from 2011 to 2015.  Appendix B 
nt in   $60 120 riptio provides total reimbursement for 
me  ns brand-name drugs categorized by the 
se $40 80  in number of years that each drug had Part D 
ur  m
mb $20 40 illio reimbursement from 2011 to 2015. 
ei  n
R $0 0 s Although total reimbursement increased 
  2011 2012 2013 2014 2015 substantially from 2011 to 2015, the total 
Total reimbursement number of prescriptions for brand-name 
 
Total prescriptions drugs decreased 17 percent, from 
Source: OIG analysis of Medicare Part D data, 2011 to 2015.  229 million in 2011 to 191 million in 2015.  
After accounting for rebates, Part D reimbursement still increased 
62 percent from 2011 to 2015 
Part D relies on plan sponsors to negotiate drug manufacturer rebates that reduce the cost 
of the program to beneficiaries and the Government.  Total rebate dollars for all 
brand-name drugs in Part D more than doubled (a 155 percent increase) across the 5 years, 
from $9 billion in 2011 to $23 billion in 2015.   
Despite the substantial growth in rebates,  Exhibit 3: From 2011 to 2015, the gap between 
total reimbursement and total rebates 
the gap between total reimbursement and 
increased each year for brand-name drugs in 
total rebates increased from 2011 to 2015, 
Part D  
as shown in Exhibit 3.  Therefore, total 
$125
rebate-adjusted reimbursement under  Total 
  $100
Part D still increased 62 percent, from  reimbursement
 
$49 billion in 2011 to $80 billion in 2015.    ons $75
In addition, the percentage of   Billi $50
brand-name drugs for which    Total 
$25
manufacturers paid rebates decreased.     rebates
 
$0
Specifically, manufacturers paid rebates 
  2011 2012 2013 2014 2015
for 72 percent of brand-name drugs 
 
Source:  OIG analysis of Medicare Part D data, 2011 to 2015. 
 
10 These reimbursement totals do not include rebates.  We also did not include dispensing fees, sales tax, or 
vaccine administration fees in our calculation of Part D reimbursement.   
Increases in Reimbursement for Brand-Name Drugs in Part D  4 
OEI-03-15-00080  (2,612 of 3,637 drugs) in 2011, but paid rebates for 61 percent of brand-name drugs 
(3,328 of 5,492 drugs) in 2015.    
Part D unit costs for brand-name drugs rose nearly 6 times faster 
than inflation from 2011 to 2015 
From 2011 to 2015, the average unit cost for brand-name drugs with Part D reimbursement 
in all 5 years increased 29 percent; this is nearly 6 times greater than the 5-percent increase 
in the consumer price index (CPI) measure of inflation.11  Part D unit costs outpaced 
inflation for 85 percent of the brand-name drugs we reviewed.   
Exhibit 4: The rate of inflation slowed as Part D unit costs for  
brand-name drugs increased from 2011 to 2015 
e 10%
s Part D unit cost median
a
re 8% percentage increase
c
n
nt i 6% Rebate-adusted Part D unit cost
e 4%
c median percentage increase
r
e
P 2%
CPI - rate of inflation
0%
2011 to 2012 to 2013 to 2014 to
2012 2013 2014 2015
Source: OIG analysis of Medicare Part D data, 2011 to 2015. 
As Exhibit 4 shows, the median rate of increase in Part D unit costs grew from 2011 to 2015, 
while the rate of increase in the CPI declined across the 5-year period.  Specifically, the CPI 
increased between 0.1 percent and 2.1 percent each year from 2011 to 2015.  At the same 
time, Part D unit costs had median increases of 9 to 10 percent for brand-name drugs with 
Part D reimbursement across 2 consecutive years.  When we adjusted Part D unit costs to 
take rebates into account, rebate-adjusted unit costs increased at almost the same rate as 
non-rebate-adjusted unit costs from 2011 to 2015.12  
Benchmark prices for brand-name drugs in Part D also increased faster than 
inflation from 2011 to 2015 
Benchmark pricesi.e., AWPs and WACsreflect manufacturer prices, and plan sponsors 
generally use benchmark prices as a basis to negotiate Part D reimbursement amounts.   
We found that while the rate of inflation slowed from 2011 to 2015, benchmark prices 
actually increased approximately 10 percent for brand-name drugs reimbursed by Part D in 
 
11 The CPI is the measure of inflation used to set rebates for drugs in the Medicaid program. 
12 Not all brand-name drugs that we reviewed were included in the rebate data (between one and seven drugs 
were missing from these files in each year).  We did not include these missing drugs in our analysis of 
rebate-adjusted reimbursement amounts. 
Increases in Reimbursement for Brand-Name Drugs in Part D  5 
OEI-03-15-00080  2 consecutive years, 
Exhibit 5: Benchmark prices for brand-name drugs in Part D 
as shown in  increased at a greater rate than inflation from 2011 to 2015
Exhibit 5.  Part D 
10% Part D unit costs
unit costs more 
Average wholesale prices
closely followed the 
5%
increasing trend of  Wholesale acquisition costs
benchmark prices  CPI - rate of inflation
0%
than the declining 
2011 to 2012 to 2013 to 2014 to
trend in inflation  2012 2013 2014 2015
rates.   Source: OIG analysis of Medicare Part D data, 2011 to 2015. 
For almost half of brand-name drugs reviewed, Part D unit costs 
increased at least 50 percent from 2011 to 2015  
 
 
Of the 3,578 brand-name  drugs that were reimbursed by Part D in every year from 2011 to 
 
2015, 89 percent had unit  cost increases across the 5-year span.  The average unit cost for 
 
these brand-name drugs  increased 29 percent, from $115 in 2011 to $148 in 2015.   
 
 
For nearly half of brand-name drugs reimbursed by Part D from 2011 to 2015, unit costs 
 
increased at least 50 perc ent; Part D spent $12 billion more for these same drugs in 2015 
 
than in 2011.  As shown in  Exhibit 6, unit costs at least doubled for 12 percent of these 
brand-name drugs we reSvoiuerwcee: OdI.G   aFnoarly s1i5s o pf Pearrct eDn ctla iomfs  tdhaetas, e20 d11r tuo g20s1, 5u.  nit costs were at least 
6 times higher in 2015 than in 2011.  The unit cost 
Exhibit 6: Part D unit costs at least 
for one drug, Cuprimine (250 milligram oral 
doubled for 12 percent of brand-name 
capsule), which can be used to treat rheumatoid 
drugs from 2011 to 2015 
arthritis, increased 2,143 percent, from $6 in 2011 to 
$135 in 2015.   
 
In some cases, drugs with higher unit costs had 
 
increases that were smaller in terms of percentages 
but significant in terms of dollar amounts.  The unit 
 
cost for Stelara (a solution of 45 milligrams per half 
milliliter), a drug used to treat psoriasis, increased 
 
$5,523 over the 5 years, from $10,669 in 2011 to 
$16,191 in 2015a 52-percent increase.  Appendix C 
provides the top 20 brand-name drugs by 
percentage increases in Part D unit costs from 2011 
Source:  OIG analysis of Medicare Part D data,  
2011 to 2015.   to 2015.  
Brand-name drugs with utilization decreases had greater increases in 
average unit costs from 2011 to 2015 
A majority of the drugs with Part D reimbursement for all 5 years we reviewed had lower 
utilization in 2015 than in 2011.13  On average, unit costs increased 38 percent for 
brand-name drugs with fewer prescriptions in 2015 than in 2011.  For the remaining 
 
13 Of the brand-name drugs reimbursed in every year from 2011 to 2015, 65 percent of these brand-name drugs 
had fewer prescriptions in 2015 than in 2011, and 63 percent had fewer units dispensed in 2015 than in 2011.   
Increases in Reimbursement for Brand-Name Drugs in Part D  6 
OEI-03-15-00080  brand-name drugs, unit costs increased at a lower rate (23 percent, on average) from 2011 
to 2015.14  In other words, the brand-name drugs with utilization decreases were associated 
with greater increases in unit costs.   
Part D unit costs for brand-name drugs with the most utilization increased 
at a significantly greater rate than all brand-name drugs in Part D from 2011 
to 2015 
Average unit costs for the 200 brand-name drugs with the most prescriptions in 2015 
increased at nearly double the rate of increase for all the brand-name drugs we reviewed 
(57 percent vs. 29 percent).  The 200 most-utilized brand-name drugs in 2015 accounted 
for 85 percent of prescriptions and 71 percent of total Part D reimbursement for the 
brand-name drugs we reviewed.  Part D reimbursement for these same 200 brand-name 
drugs was $26 billion higher in 2015 than in 2011.  Therefore, manufacturers may have 
raised prices for brand-name drugs taken by a substantial number of beneficiaries in 2015. 
Beneficiaries average out-of-pocket costs for brand-name drugs 
increased 40 percent from 2011 to 2015 
Between 2011 and 2015, Part D beneficiaries who did not receive third-party assistance had 
$29 billion in out-of-pocket costs (which include copayments and coinsurance amounts) for 
all brand-name drugs in Part D.15  For brand-name drugs with reimbursement in all 5 years 
we reviewed, beneficiaries had an average of $161 in out-of-pocket costs per brand-name 
drug in 2011, but spent an average of $225 for these same drugs in 2015an increase of 
40 percent.16  
In addition, the percentage of beneficiaries who had at least $2,000 per year in 
out-of-pocket costs for brand-name drugs nearly doubled from 3.7 percent in 2011 to 
7.3 percent in 2015.  These trends are consistent with those described in the 2017 OIG 
report, which found an increase in the number of beneficiaries who reached the 
catastrophic-coverage phase from 2010 to 2015.17 
Beneficiaries total out-of-pocket costs were highest for three therapeutic 
classes of maintenance drugs  
For brand-name drugs with Part D reimbursement in all 5 years we reviewed, total 
beneficiary out-of-pocket costs were highest for brand-name insulins, cholesterol 
 
14 Brand-name drugs with fewer units dispensed also were associated with greater increases in average unit 
costs (42 percent vs. 21 percent) from 2011 to 2015. 
15 For this analysis, we did not include beneficiaries who received third-party assistancee.g., low-income 
cost-sharing subsidies, group health plans, or State Pharmaceutical Assistance Programsto cover their 
cost-sharing obligations.  The percentage of beneficiaries that we removed from our analysis ranged from 
44 percent to 56 percent per year.  
16 At the median, beneficiary out-of-pocket costs per brand-name drug increased from an average of $77 in 
2011 to $97 in 2015 for drugs with reimbursement in all 5 years.   
17 OIG, High-Price Drugs are Increasing Federal Payments for Medicare Part D Catastrophic Coverage 
(OEI-02-16-00270), January 2017. 
Increases in Reimbursement for Brand-Name Drugs in Part D  7 
OEI-03-15-00080  reducers,18 and respiratory tract corticosteroids, e.g., inhalers.  Beneficiaries paid $7.2 billion 
in out-of-pocket costs for brand-name drugs in these therapeutic classes across the 
5 years.   
Although insulins, cholesterol reducers, and respiratory tract corticosteroids were not 
among the most expensive therapeutic classes (out-of-pocket costs averaged between 
$23 and $45 per prescription), millions of beneficiaries used these drugs each year between 
2011 and 2015.  Part D 
Exhibit 7: Beneficiary out-of-pocket costs for brand-name 
total reimbursement for 
drugs in three therapeutic classes of maintenance drugs 
brand-name drugs in 
increased from 2011 to 2015 
these therapeutic classes 
 
was $6.5 billion higher in  Average  Total  Number of 
  out-of-pocket  out-of-pocket costs prescriptions
2015 than in 2011.  For  costs (in billions)) (in millions)
 
brand-name drugs in 
these three therapeutic   
$39 $1.6 50 
classes, Exhibit 7    $1.4 41 
$29
provides the total and 
 
average out-of-pocket   
costs, and the number of 
 
prescriptions from 2011  2011 2015 2011 2015 2011 2015
to 2015.  Source: OIG analysis of Medicare Part D data, 2011 to 2015. 
Because this analysis of brand-name drugs by therapeutic classes included only drugs 
reimbursed in all 5 years we reviewed, increased out-of-pocket costs cannot be attributed 
to beneficiaries paying for newer, more expensive drugs.  Furthermore, the brand-name 
drugs in these therapeutic classes are typically maintenance drugs, which means that they 
may be prescribed for chronic, long-term conditions and are taken on a regular, recurring 
basis.  Therefore, to the extent that unit costs continue to increase, Part D beneficiaries are 
likely to continue to be affected for years to come.  
 
CONCLUSION  
We found that, over a 5-year period, increases in Part D reimbursement for brand-name 
drugs outpaced inflation.  Despite a decrease in utilization of brand-name drugs, these 
substantial increases in reimbursement led to greater Medicare spending and higher 
beneficiary out-of-pocket costs for these drugs.  Specifically, total Part D reimbursement for 
all brand-name drugs increased 77 percent, from $58 billion in 2011 to $102 billion in 2015.  
To control for the possibilities that (1) increases in utilization or (2) newer, more expensive 
brand-name drugs may have affected total Part D reimbursement, we analyzed the number 
of prescriptions and unit costs for brand-name drugs that were reimbursed in every year 
from 2011 to 2015.  Overall, we found that utilization decreased for the majority of these 
 
18 This therapeutic class refers to brand-name drugs in a specific type of cholesterol-lowering medications called 
HMG-CoA reductase inhibitors.  
Increases in Reimbursement for Brand-Name Drugs in Part D  8 
OEI-03-15-00080  brand-name drugs, while the average Part D unit cost increased 29 percent from 2011 to 
2015.   
Increases in Part D unit costs significantly outpaced inflation; in fact, the average unit cost 
for brand-name drugs in Part D rose nearly 6 times faster than inflation from 2011 to 2015.  
We also found that Part D unit costs closely followed the upward trend in benchmark 
prices, which are typically reflective of manufacturer prices.  Thereforelike the 2016 ASPE 
report, which suggested that increases in drug prices contributed to the growth in total 
prescription drug spendingwe conclude that increases in unit prices for brand-name 
drugs resulted in Medicare and its beneficiaries paying more for these drugs.  
We also found that the percentage of beneficiaries who were responsible for out-of-pocket 
costs of at least $2,000 per year for brand-name drugs nearly doubled across the 5 years.  
These trends are consistent with those described in the previous OIG report, which found 
increases in the number of beneficiaries who reached the catastrophic-coverage phase of 
their Part D benefits.  In addition, we found that total beneficiary out-of-pocket costs were 
highest for brand-name drugs in three therapeutic classes of maintenance drugs.  Because 
maintenance drugs are typically used to treat chronic, long-term conditions, increasing 
reimbursement for these drugs will continue to affect Part D and its beneficiaries for years 
to come.  OIG remains committed to examining these issues and working with CMS to 
ensure the integrity of the Part D program. 
Increases in Reimbursement for Brand-Name Drugs in Part D  9 
OEI-03-15-00080  APPENDIX A: Detailed Methodology 
Part D Reimbursement Analysis  
We used prescription drug event records, i.e., prescriptions, for calendar year 2015 as our 
basis to select brand-name drugs covered by Part D for our analysis.  We defined 
brand-name drugs as NDCs that were classified as (1) innovator products by the First 
Databank compendium and (2) brand-name products in the Red Book compendium.19   
Total Part D reimbursement.  To calculate the total amount Part D reimbursed for 
brand-name drugs, we aggregated the total ingredient costs for all brand-name drugs paid 
through Part D for each year from 2011 to 2015.  We did not include additional drug costs 
included on prescription drug event records, e.g., dispensing fees or sales tax, which may 
vary by locality. 
Average unit costs.  In our calculation of average Part D unit costs, we kept only the 
3,578 brand-name drugs that had at least 1 prescription in each of the 5 years under 
review.  To determine the Part D unit costs for a brand-name drug, we summed the total 
ingredient costs for each drug and divided by the total units of the drug dispensed each 
year.  We then compared changes in these amounts from 2011 to 2015.   
We also determined changes in average Part D unit costs for brand-name drugs with 
utilization decreases and those without utilization decreases from 2011 to 2015.  We 
calculated utilization based on (1) the number of prescriptions per drug and (2) the number 
of units dispensed for each drug.  In addition, we selected the 200 brand-name drugs with 
the highest number of prescriptions in 2015.  We determined average unit costs for these 
200 brand-name drugs with the highest utilization, and we compared changes in 
reimbursement amounts for these drugs from 2011 to 2015.   
Rebates.  We obtained Direct and Indirect Remuneration (DIR) data from CMS and 
summed the total rebates for all brand-name drugs that were reimbursed by Part D from 
2011 to 2015.  Not all brand-name drugs under review were included in the DIR data (for 
each of the 5 years, between one and seven drugs were missing from these files).  We did 
not include the drugs without DIR data in our analysis of rebate-adjusted reimbursement 
amounts.   
We subtracted the total rebates from total Part D reimbursement to calculate total 
rebate-adjusted reimbursement for all brand-name drugs from 2011 to 2015.  We also 
determined the number and percentage of brand-name drugs that had rebates in each of 
the 5 years. 
Inflation Rate Analysis 
We used the CPI as calculated by the Bureau of Labor Statistics to examine price trends for 
consumer goods.  According to the Bureau of Labor Statistics, the CPI measures the 
 
19 The drug classifications from the compendia were obtained in July 2016.  We did not include drugs that were 
categorized as branded-generics in Red Book.   
Increases in Reimbursement for Brand-Name Drugs in Part D  10 
OEI-03-15-00080  average change over time in the prices paid by urban consumers for a market basket of 
consumer goods and services.   
To determine the year-to-year changes in Part D reimbursement for brand-name drugs, we 
selected drugs that were reimbursed by Part D in 2 consecutive years under review.  For 
example, to determine the percentage change in reimbursement between 2011 and 2012, 
we kept brand-name drugs that were reimbursed by Part D in both years and compared 
unit costs for these drugs.  The number of drugs that were included in our comparison of 
consecutive years increased as new drugs were approved and covered by Part D.  As a 
result, we were able to include year-to-year changes for newer brand-name drugs that may 
not have been available during all 5 years under review.   
We calculated the median percentage change in Part D unit costs and rebate-adjusted unit 
costs between each year from 2011 to 2015.  We then compared these rates of change to 
the rate of change in the CPI from year to year. 
Benchmark Prices 
We obtained WACs from two national drug compendia: Red Book and First Databank and 
we obtained AWPs from the Red Book compendium.  We used the WACs and AWPs from 
the fourth quarter of each year from 2011 to 2015 to track the changes in unit prices for 
each benchmark price.20  For this analysis, we included brand-name drugs that (1) had unit 
prices for each benchmark and (2) were also reimbursed by Part D in 2 consecutive years 
reviewed.  We calculated the median percentage changes in benchmark prices for these 
drugs from year to year, and we compared them to Part D unit costs and the rate of 
inflation from 2011 to 2015.     
Beneficiary Out-of-Pocket Costs 
Beneficiary out-of-pocket costs include the cost-sharing amounts, e.g., deductibles, 
copayments, and coinsurance amounts, the beneficiary is obligated to pay for a drug.  
Prescription drug event records have a patient pay amount field that includes the 
cost-sharing amounts that were not reimbursed by a third party.  In our calculation of 
beneficiaries total out-of-pocket costs, we did not include beneficiaries who may have 
received third-party assistancee.g., low-income cost-sharing subsidies, group health 
plans, or State Pharmaceutical Assistance Programsto cover their cost-sharing 
requirements at the point of sale.21 
We summed the patient pay amounts for brand-name drugs in each year to determine the 
total amounts that all beneficiaries spent in out-of-pocket costs for these drugs from 2011 
 
20 First Databank files are available monthly.  We downloaded these files from October, November, and 
December to calculate the average fourth-quarter WACs from 2011 to 2015, with the exception of the 
October 2013 First Databank file, which was not available; we calculated average fourth-quarter 2013 WACs 
using the November and December 2013 files.  We used these data to substitute WACs for brand-name drugs 
that did not have WACs in Red Book.   
21 The percentage of beneficiaries that we removed from our analysis ranged from 44 percent to 56 percent per 
year. 
Increases in Reimbursement for Brand-Name Drugs in Part D  11 
OEI-03-15-00080  to 2015.  We then calculated changes in beneficiary average out-of-pocket costs for only 
the brand-name drugs that were reimbursed in all 5 years we reviewed.     
Therapeutic classes.  We used the American Hospital Formulary Service codes available in 
First Databank to group brand-name drugs into therapeutic classes.22  Although some 
drugs may be used to treat more than one condition, each drug we reviewed was assigned 
to one therapeutic class in First Databank.  We matched each brand-name drug with its 
corresponding therapeutic classification code according to the First Databank files.  There 
were 195 therapeutic classes with at least 1 brand-name drug in 2015.   
We identified the three therapeutic classes with the highest total out-of-pocket costs.  We 
calculated the average out-of-pocket costs, total out-of-pocket costs, and number of 
prescriptions for these three therapeutic classes and compared the changes in these 
amounts from 2011 to 2015.  For this analysis, we kept only brand-name drugs that were 
reimbursed by Part D in all 5 years we reviewed. 
Limitations 
We did not independently verify the completeness or accuracy of data from CMS, 
Red Book, First Databank, or the Bureau of Labor Statistics.    
Standards 
This study was conducted in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency.   
 
22 We used the First Databank file from January 2016 to select American Hospital Formulary Service codes. 
Increases in Reimbursement for Brand-Name Drugs in Part D  12 
OEI-03-15-00080  APPENDIX B: Total reimbursement for 
brand-name drugs categorized by the number 
of years that Part D reimbursed these drugs from 
2011 to 2015 
This appendix provides information about the amount of total Part D reimbursement 
associated with brand-name drugs that were reimbursed by Part D in every year from 2011 
to 2015.  We calculated total Part D reimbursement for brand-name drugs that were 
reimbursed in all 5 years, and we compared these amounts to total reimbursement for all 
brand-name drugs in Part D from 2011 to 2015.   
We found that total Part D reimbursement for brand-name drugs with reimbursement in all 
5 years increased 24 percent, from $58 billion in 2011 to $72 billion in 2015.  In addition, 
70 percent of total Part D reimbursement in 2015 was for brand-name drugs that were 
reimbursed every year from 2011 to 2015.  The remaining 30 percent of total Part D 
reimbursement in 2015 was associated with drugs that had Part D reimbursement in fewer 
than 5 years.  
$100
Numberof years 
$80
with Part D 
reimbursement
LFeesws etrh athna 5n  y5e yaersars
$60
s
n
o 5 years
Billi
$40
$20
$0
2011 2012 2013 2014 2015
Source: OIG analysis of Medicare Part D data, 2011 to 2015. 
Increases in Reimbursement for Brand-Name Drugs in Part D  13 
OEI-03-15-00080  APPENDIX C:  Top 20 brand-name drugs by 
percentage increases in unit costs from 2011 to 
2015 
     
Percentage  Percentage 
Total 
Selected  Increase in  Change in  
Drug Name  NDC  Reimbursement, 
Treatment(s)  Unit Costs  Prescriptions  
2011 to 2015 
2011 to 2015  2011 to 2015 
Dianeal low calcium 
00941-0409-06  Renal failure  209,248%  -37%  $177,755 
with dextrose  
Isordil Titradose   64455-0152-01  Angina (chest pain)  6,112%  100%  $3,759 
Timentin   00029-6579-21  Infections  4,661%  -77%  $43,159 
Doribax   50458-0402-01  Infections  4,219%  -99%  $67,781 
Levsin  68220-0111-05  Irritable bowel syndrome  4,212%  200%  $3,801 
Salex  13548-0010-17  Skin disorders, lesions  4,202%  -62%  $69,218 
Miacalcin  00078-0149-23  Osteoporosis  2,771%  -63%  $11,180,866 
Thiola  00178-0900-01  Kidney stone prevention  2,465%  1,388%  $10,884,884 
Rheumatoid arthritis, 
Cuprimine  25010-0705-15  2,143%  -32%  $48,216,331 
Wilsons disease 
Travasol  00338-0644-03  Nitrogen loss  2,046%  -84%  $151,531 
Tygacil  00008-4990-01  Infections, pneumonia  1,924%  -98%  $271,305 
Syprine  25010-0710-15  Wilsons disease  1,898%  -62%  $21,921,906 
Tygacil  00008-4990-02  Infections, pneumonia  1,588%  -100%  $2,764,697 
Aldara  99207-0260-12  Skin conditions  1,474%  2,200%  $953,855 
Dibenzyline  65197-0001-01  Certain tumors  1,431%  -47%  $23,041,204 
Zyvox  00009-5137-01  Infections  1,328%  100%  $40,397 
Breast cancer, 
Android  00187-0902-01  1,070%  -92%  $4,998,554 
testosterone deficiency 
Ala-Scalp HP  00316-0140-01  Skin inflammation  1,051%  10%  $66,809 
Rocephin  00004-1964-01  Infections  1,013%  -2%  $145,334 
Rheumatoid arthritis, 
Depen  00037-4401-01  987%  -25%  $5,757,734 
Wilsons disease 
Source:  OIG analysis of Medicare Part D data, 2011 to 2015. 
Note:  Because of different package sizes or formulations, a drug name may appear multiple times.   
 
 
   
Increases in Reimbursement for Brand-Name Drugs in Part D  14 
OEI-03-15-00080  ACKNOWLEDGMENTS 
Stefanie Rosen Vance served as the team leader for this study.  Others in the Office of 
Evaluation and Inspections who conducted the study include Emily Dieckman, Greg Mayers, 
and Aisha Davis.  Office of Evaluation and Inspections staff who provided support include 
Clarence Arnold, Meghan Riggs, and Christine Moritz.  
We would also like to acknowledge the contributions of other Office of Inspector General 
staff, including Jessica Swanstrom. 
This report was prepared under the direction of Linda Ragone, Regional Inspector General 
for Evaluation and Inspections in the Philadelphia regional office, and Edward K. Burley, 
Deputy Regional Inspector General.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
To obtain additional information concerning this report or to obtain copies, contact the 
Office of Public Affairs at Public.Affairs@oig.hhs.gov.   
 
Increases in Reimbursement for Brand-Name Drugs in Part D  15 
OEI-03-15-00080  ABOUT THE OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
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