Price Increases Continue to Outpace Inflation for Many Medicare Part D Drugs

In response to strong public support for government to address rising prescription drug prices, President Biden endorsed several proposals during his campaign, including limiting drug price increases to no more than the rate of inflation – limits that would apply to both Medicare and a new public option. 

As context for understanding the rationale for efforts to limit drug price increases, a new analysis compares changes in list prices for drugs covered by Medicare Part D in 2019 to the inflation rate, based on data from the most recent Medicare Part D drug spending from the Centers for Medicare & Medicaid Services (CMS). 

The analysis found half of all Part D-covered drugs (50%, or 1,646 drugs) had list price increases that exceeded the rate of inflation between July 2018 and July 2019, which was 1.8%.

List prices increased by 10% or more for 450 (14%) of all Part D covered drugs between 2018 and 2019, while more than one-third (36%, or 1,196 drugs) had price increases above the rate of inflation but below 10%. Prices increased faster than inflation between 2018 and 2019 for 22 of the 25 drugs with the highest total Medicare Part D spending in 2019.

The analysis suggests the potential for savings to both the federal government and to Medicare beneficiaries if drug manufacturers limited price increases to the rate of inflation. However, despite the potential for savings based on limiting price increases, drug manufacturers could respond to the policy change by increasing launch prices for new drugs.