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Negotiated Prices, Formulary Could Cut Medicare Rx Spending

Findings based on analysis of 31 different insulin products using 2017 VA formulary and prices

WEDNESDAY, Feb. 5, 2020 (HealthDay News) — Using negotiated prices and a defined formulary, similar to the Department of Veterans Affairs (VA), Medicare could save billions of dollars on prescription insulin for patients with diabetes, according to a research letter published online Feb. 3 in JAMA Internal Medicine.

William B. Feldman, M.D., from Brigham and Women’s Hospital in Boston, and colleagues estimated the savings that would result if Medicare Part D used VA-negotiated prices (based on the Historical VA Pharmaceutical Price Files) and the VA formulary.

The researchers found that in 2017, Medicare Part D spent $13.3 billion before rebates and $7.8 billion after estimated rebates on 31 different insulin products across six classes. If Medicare Part D had used VA-negotiated prices, it would have spent $5.0 billion, saving $2.9 billion compared with after-rebate spending. If Medicare Part D had also implemented the VA’s formulary restrictions within each insulin class (and used national contract prices), total Part D spending would have been $3.5 billion, yielding savings of $4.4 billion compared with after-rebate spending.

“Our analysis underscores the potential for Congress to reduce prescription drug spending by allowing Medicare to negotiate with manufacturers and establish a formulary like the VA,” the authors write.

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