US Pharma discounts to Medicare will see drug prices rise, says CBO

US legislation that requires manufacturers of brand-name drugs to provide new discounts and rebates for drugs purchased through Medicare and Medicaid, with the amount of those discounts and rebates based on the prices of the drugs, will see overall prices rise, according to estimates by the USA’ Congressional Budget Office (CBO). Manufacturers thus have an incentive to raise those prices to offset the costs of providing the new discounts and rebates, although other forces will limit their ability to do so, it states.

According to CBO Director Douglas Elmendorf in a letter responding to a request from Republican Congressman Paul Ryan of the House Budget Committee, for drugs covered by Medicare’s drug benefit, the CBO estimated that those provisions of the legislation will raise the prices paid by pharmacies less any rebates paid to insurers by manufacturers by about 1%, on average. That increase in prices will make federal costs for Medicare’s drug benefit and the costs faced by some beneficiaries slightly higher than they would be in the absence of those provisions, while the new discounts will make the costs faced by other beneficiaries substantially lower.

Other provisions will constrain drugmakers’ ability to raise prices to offset rebates