GAO Report Illuminates Insurer Influence On Drug Discounts

Law360, September 20, 2019

Concern over the high price of prescription drugs is a constant in American policy debates. One idea that arises frequently in discussions about how to lower costs is for the federal government to negotiate prices with manufacturers for drugs covered by Medicare Part D, the federal insurance program that covers prescription drugs for the elderly.

Often lost in this debate is the fact that drug prices in Part D are already negotiated – not by the government but by the private insurers that compete to offer coverage through Medicare. Because of the confidential nature of those negotiations, little information about them has been public. In July 2019, however, the Government Accountability Office (GAO) released a report on the role of pharmacy benefit managers (PBMs) in the Part D program that contained new data on the discounts negotiated across drugs and insurers.

In a Law360 article, “GAO Report Illuminates Insurer Influence On Drug Discounts,” Analysis Group Vice President Christopher Ody, Managing Principal Paul Greenberg, and affiliate Craig Garthwaite rely on the newly available data to assess the role of private negotiations in managing drug costs. The authors explain how rebates – discounts off the list price that manufacturers offer to PBMs – work in the federal program, and discuss the wide variation in the rebates offered by particular insurance plans. They also comment on the utility of private negotiations compared with some proposed alternatives based on more direct government involvement.

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Ody C, Garthwaite C, Greenberg P