Medicare Could Use the VA’s Negotiation Results on Insulins and Other Drugs

VA-Like Negotiations on Insulin Prices Could Save Medicare Billions, MedPage Today, Zeena Nackerdien, February 21, 2020

I am going to dispense with the reasoning dissing the increased pricing of Insulin and go straight to a pricing strategy. Suffice it to say, the various versions developed of Insulin do not justify the pricing increases seen today.

Recently, Philip Longman (“Best Care Anywhere”) was advocating for Medicare pricing for everyone using commercial healthcare insurance. The only problem with this approach is we are not getting to the root cause of increasing prices for pharma, hospital supplies, and hospitals. Kocher and Berwick breached the same topic with their plan to transition from today’s Commercial Healthcare Insurance to Single Payer by reducing insurance premium growth rates – “limit hospital prices to Medicare prices plus 20 percent.” The authors of this particular article (originally in JAMA)  on Medicare advocate using VA Pricing for Insulin.  Further down is a second article taken from JAMA Network (which I have access to) advocating the use of VA pricing for orally-taken drugs also ands using an approved formulary.

Talking about VA pricing for pharmacy after the leap.

While government agencies in many countries negotiate prices directly with pharmaceutical companies helping to drive down the costs of medicines, the U.S. has long adopted a free market attitude towards prescription drugs as well as other commercial products. Drug companies through PBMs negotiate costs and pricing with private insurance companies nationally to secure the best tier possible. Historically the largest buyer of drugs has been blocked by Congress to negotiate drug prices which leaves Medicare at a disadvantage.

On the other hand, the VA receives a prescription drug discount, negotiates pricing, and creates a formulary to limit outpatient drug spending. In a JAMA Internal Medicine Research Letter, William Feldman, MD, of Brigham and Women’s Hospital in Boston, and colleagues reported that if Medicare Part D negotiated drug prices like the VA and used the same formulary, the government could have saved up to $4.4 billion on insulin costs in 2017. I do not have access to the complete version of this letter other than a brief JAMA Editorial Content paragraph.

The US Department of Veterans Affairs (VA), unlike Medicare Part D, receives a minimum discount for prescription drug purchases and additionally relies on price negotiation and a national formulary to limit outpatient drug spending. A 2019 study found that Medicare could have saved $14.4 billion in 2016 from an estimated $32.5 billion in spending if it used VA-negotiated prices for the 50 costliest Part D oral drugs. Inhaled and injectable products represented 16 of the 50 costliest drugs covered under Medicare Part D in 2016. Recently, our research group reported that Medicare could have saved $4.2 billion of an estimated $7.3 billion in spending on inhalers in 2017 by using VA-negotiated prices and the VA formulary.

Reviewing the 2017 Medicare Part D Drug Spending Dashboard, the Historical VA Pharmaceutical Price Files (obtain 2017 prices), and the 2019 VA National Formulary (with recent formulary changes) to compare insulin prices for Medicare Part D and for the VA, Feldman and team looked at 31 different insulin products across six classes.

Medicare receives rebates from drug companies to which the researchers estimated to be a 41% rebate in 2017 and which was  based on data from the U.S. Government Accountability Office. This meant that the pre-rebate insulin costs of $13.3 billion dropped to $7.8 billion on the insulin products under investigation.

If Medicare used VA-negotiated prices, Medicare Part D spending would have decreased $2.9 billion more to $5 billion — a greater savings versus after rebates. Implementing the VA’s formulary restrictions within each insulin class (and used national contract prices), the estimated total Part D spending would have decreased further to $3.5 billion. Feldman and his team estimated a saving of $4.4 billion after post-rebate spending.

In a sensitivity analysis, Feldman and team showed that even if the assumed Medicare rebates were higher, savings associated with use of VA-negotiated prices and the VA formulary would have been $1.1 billion.

Rebate information from companies is confidential the same as negotiated pricing is confidential between countries which the World Health Organization has complained about in their paper on Cancer Drug Pricing. I do not have access to JAMA Internal Medicine; but, I can get into JAMA Network and there is a similar study there plus their Research Letter.  “Assessment of Spending in Medicare Part D If Medication Prices From the Department of Veterans Affairs Were Used,” Brett Venker, Pharm; Kevin B. Stephenson, MD; Walid F. Gellad, MD, MPH, January 2019. This Research letter has a similar chart I am sure exists in the Feldman study. The Venker, Stephenson, and Gellad Research Letter reports on findings gross spending,  spending using Medicare rebates, Medicare spending using VA pricing, and savings from using VA pricing. then on the top 50 oral drugs.

I made this chart large so it is easier to read and evaluate what can be saved if VA pricing was used for Medicare along with Medicare rebates. JAMA Internal Medicine editor at large Robert Steinbrook, MD, noted that the researchers’ estimates (Feldman Study) could be imprecise; but he said he supports the conclusions. “Even if the $4.4 billion figure overestimates the potential savings, the potential for lower prices would substantially increase many patients’ access to life-saving insulin products.” That savings and pricing results are on Insulin alone.

The chart shows oral drugs. For 2016 using VA pricing for the top do drugs, there is a potential savings of greater than $14 billion. We are just talking Medicare.

Steinbrook: the study by Feldman’s group is one in a series that the journal has published recently to show how $billions could be saved annually by the Medicare Part D prescription drug program.

“These studies have a consistent and clear message,” Steinbrook wrote. “At present, the issue for the federal government is not the ability to easily save billions of dollars each year in Medicare Part D spending. Rather, the issue is the political will in Washington, D.C., to facilitate savings through legislation and regulatory changes, such as measures that would allow price negotiations, benchmark pricing, and formulary restrictions, and in states to remove prescribing barriers, such as those for generic substitution and therapeutic interchange.”

The plan should include savings and pricing for all and not just Medicare recipients. It should be applied to more than just drugs.