Study: Medicare Part D Sees Falling Drug Costs

Researchers said eight of the 10 most commonly prescribed drug classes covered by the program known as Medicare Part D have fallen to an average daily cost of therapy of $1 in December 2010 from $1.50 in January 2006.

This trend toward cheaper generic drugs, as brand-name patents expire, is expected to continue through 2015, said the study by Murray Aitken of the IMS Institute for Healthcare Informatics and Ernst Berndt of the Massachusetts Institute of Technology and the National Bureau of Economic Research.

The study forecast the average cost of therapy to fall to 65 cents a day by the end of 2015, or 57 percent lower than it was in January 2006.

The findings could temper some of the concern over the growing costs of Part D that subsidizes medicines for seniors and disabled Medicare patients who pay some of the costs through insurance plans and out of pocket.

Part D went into effect in 2006 after being created under 2003 legislation passed by a Republican-led Congress and signed into law by then-President George W. Bush. It has been criticized for being insufficiently funded, a costly drag on the healthcare system and a contributor to the national debt.

Companies such as Aetna Inc, CVS Caremark Corp and Humana Inc sell the Part D plans, but are overseen by the Centers on Medicare and Medicaid Services (CMS).

Last year, 34.5 million Americans were enrolled in Part D plans, receiving an average of $1,789 in benefits, according to a report issued in May by the Medicare Trustees.

The trustees said almost $62 billion was spent on Part D prescription drug benefits in 2010 and projected that this year's spending will reach $67 billion, growing to almost $157 billion by 2020 as the aging U.S. population sees more and more people enroll.

But the authors of Friday's study said that may be overstating the costs.

"The general conclusion we draw is that cost declines observed in the first five years of Medicare Part D can be expected to continue," the researchers wrote.

"The 2006-2015 decade is one of steadily decreasing average daily cost of therapy."

Berndt, a co-author, said CMS has fairly consistently over-projected future prescription drug costs.

"(It) doesn't properly take into account reasonably predictable patent protection expirations," he told reporters on a conference call.