As Part D Drug Prices are Rising are Profits Falling?

The House Oversight and Government Reform Committee says the prices paid by consumers for the ten most prescribed drugs in the Part D program rose an average of 6.8% since December. At the same time, the committee says wholesale prices have risen just 3%.

The committee also says that rebates from the drug companies to the Part D players total 4.6% of total drug costs--down from 5.2% last year. Medicare had expected the drug plans to reach 6% in rebates during 2006.

The prescription drug and insurance industry counter that Part D premiums are lower than anyone expected them to be at this point and the higher use of generic drugs is saving everyone money.

Most seniors won't see the impact of these higher prescription drug prices until they hit the coverage gap (or "doughnut hole") and have to pay the full cost of the drugs. That gap begins when a senior's covered drug costs hit $2,250 during the calendar year.

Seeing brand-name drugs prices up 6.8% in just a few months is worrisome--that is what we would have expected to happen over a full year.

News of these price increases is particularly notable for me because I have been hearing that insurer's Part D profit results in the early months have sometimes not met expectations. There are some anecdotal reports of early claims being higher than expected.

All of this is either very early data or too anecdotal to know what's really going on.

But it is consistent enough to make us wonder if something is happening in the new Part D program in its second year.