Drug Price Increases That Exceed Inflation Are Costing Medicare Part D Billions

Leigh Purvis, AARP Public Policy Institute

Published June 07, 2021

This AARP Public Policy Institute Spotlight finds that total Medicare Part D spending on 50 top brand-name drugs was $38 billion higher between 2015 and 2019 than it would have been if drug manufacturers had not increased their prices faster than the corresponding rate of inflation.

Our analysis also found that the vast majority of the top 50 sole-source brand-name drugs experienced annual price increases over the study period. On average, nearly 90 percent of the top 50 drugs had annual price increases that exceeded the corresponding rate of general inflation from the end of 2015 through 2019.

It is unclear whether the inflation-based rebates under consideration in Congress would lead to widespread changes in drug company pricing behavior. However, given the current prevalence and magnitude of annual brand name drug price changes, it is clear that even a small movement in the right direction will result in substantial savings over the status quo.

Suggested citation:

Purvis, Leigh. Drug Price Increases That Exceed Inflation Are Costing Medicare Part D Billions. Washington, DC: AARP Public Policy Institute, June 2021 https://doi.org/10.26419/ppi.00140.001

MORE FROM AARP

RX pharmacy prescription bottle of pills

Prescription Drug Costs a Major Concern for Older Voters

Older adults are concerned about high prescription drug prices, but few know about the new law enacted in 2022 to bring down drug prices for consumers.

Medication Literacy Series: Drug Formularies

This Fact Sheet highlights the essential components of drug formularies and considers the challenges that older adults, particularly those with low medication literacy, face when responding to the impacts and implications of formularies annually and throughout the plan year.

Senior man paying contactless at Pharmacy

This AARP Public Policy Institute Spotlight report finds that list prices for 25 top Medicare Part D drugs have increased by an average of 226 percent—or more than tripled—since they first entered the market, greatly exceeding the corresponding rate of general inflation. The report is based on an analysis of 2021 data from the Centers for Medicare & Medicaid Services, Medicare Part D Spending by Drug Dashboard, and Medi-Span Price Rx Pro.

Virginia State Capitol Building On Field Against Blue Sky

Virginia Voters Are Concerned About Drug Affordability

Prescription drug affordability is a concern for many Virginia voters. They call for a Prescription Drug Affordability Board to address the issue.

Medication Literacy Series: Medication Management

This Fact Sheet explores the range of formal medication management programs that are available and the challenges that older adults, especially those with limited medication literacy—the ability to obtain information about medication, process it, and use the information to make medication decisions—and their family caregivers face when trying to manage their medications.

Drug Price Increases That Exceed Inflation Are Costing Medicare Part D Billions

FULL REPORT