The U.S. federal government is a significant purchaser of prescription medications, both directly through agencies like the Department of Defense (DoD) and indirectly via federal health insurance programs such as Medicare Part D. This analysis examines how brand-name prescription drug prices are determined within different federal programs and provides a comparison of drug prices among these programs as of 2017.
Our primary focus is on the prices, after rebates and discounts, of 176 top-selling brand-name medications in Medicare Part D. To facilitate comparison, we calculated the average price per standardized prescription, approximating a 30-day medication supply.
Notably, the average price varied considerably across programs. Medicaid exhibited the lowest average price at $118, while Medicare Part D showed the highest at $343. This price differential is largely attributed to the higher manufacturer rebates negotiated within the Medicaid program compared to Medicare Part D. The Department of Veterans Affairs (VA) and the DoD both demonstrated average prices falling between those of Medicaid and Medicare Part D.
We also compared prices for specialty drugs, a subset of the top-selling medications used for chronic, complex, or rare conditions, which are often expensive and may require specialized handling. The average price for specialty drugs ranged from $1,889 in Medicaid to $4,293 in Medicare Part D, highlighting a significant price disparity.
It is crucial to understand that these price comparisons across federal programs do not predict the consequences of applying one program’s pricing methodology to others. Drug manufacturers would likely adjust their pricing strategies in response to changes in purchasing approaches, potentially influencing drug prices across all federal programs and the private sector.
