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. During the 116th Congress, both the House of Representatives and Senate Finance Committee adopted proposals to limit annual increases in drug prices to the rate of inflation, although neither proposal was brought up for a floor vote in the Senate. The House-passed bill (H.R. 3) would have required drug manufacturers to pay a rebate to the federal government if their prices for drugs covered under Medicare Part B and Part D increased faster than the rate of inflation. A similar proposal garnered a majority of votes in the Senate Finance Committee, which was chaired at the time by GOP Senator Chuck Grassley. The Medicaid program already has a similar policy in place. With President Biden in the White House and Democrats now controlling both chambers of Congress, inflation-based limits on drug price increases might have somewhat better prospects in the 117th Congress.

As context for understanding the rationale for efforts to limit drug price increases, this 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 dashboard from the Centers for Medicare & Medicaid Services (CMS). Our analysis is based on changes in unit prices reported in the Part D dashboard, which do not reflect manufacturer rebates and discounts to plans because they are considered proprietary and therefore not publicly available. We believe this analytic approach is reasonable because both of the previous legislative proposals to require inflation rebates were based on changes in list prices, as measured by the Wholesale Acquisition Cost, which is equivalent to a list price, or the Average Manufacturer Price, which is a measure of price that may include some discounts to wholesalers but not rebates paid to plan sponsors or pharmacy benefit managers.

Our analysis finds 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% (Figure 1). Among the drugs with list price increases exceeding inflation between 2018 and 2019, the median list price increase was 6.4%, or 3.5 times the rate of inflation.

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%. Another 13% (419 drugs) had price increases below inflation. For the remaining 38% (1,241 drugs), list prices decreased between 2018 and 2019.

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 (Figure 2). For these 22 drugs, all of which are brand-name drugs, price increases ranged from 3.0% (for Novolog Flexpen, an insulin product) to 19.7% (for Imbruvica, a cancer medication). In the case of Imbruvica, taken by 25,000 Medicare Part D enrollees in 2019, this translates to an increase that exceeds 10 times the rate of inflation. The median list price increase between 2018 and 2019 across these 22 drugs was 6.5%, or 3.6 times the rate of inflation. While some of these medications are used by relatively few people with Medicare, others are used by many beneficiaries. For example, Eliquis, Xarelto, and Symbicort were each used by over one million beneficiaries in 2019, and each had a list price increase of more than 6% between 2018 and 2019.

In 2019, total Part D spending (including spending by Medicare, plans, and enrollees, not accounting for rebates) on these 22 drugs ranged from $1.2 billion (for Invega, a treatment for mental/mood disorders) to $7.3 billion (for Eliquis, used for blood clots), while annual spending per beneficiary ranged from $1,800 (for Symbicort, a treatment for asthma and lung disease) to $111,000 (for Revlimid, a cancer medication) (Table 1). List price increases on relatively high-cost drugs such as these – which include specialty tier medications for which beneficiaries pay between 25% and 33% of the total drug price in the initial coverage phase and 25% in the coverage gap phase before they qualify for catastrophic coverage – can translate directly to higher out-of-pocket costs for enrollees.

For example, after a 6.9% list price increase between 2018 and 2019, average spending per claim for Revlimid increased from $14,220 in 2018 to $15,180 in 2019 – a one-year increase of nearly $1,000. Based on the catastrophic threshold of $8,140 in total drug costs in 2019 (corresponding to out-of-pocket costs of $5,100), Medicare Part D enrollees who take this drug for the entire year would reach the catastrophic coverage phase of the Part D benefit in January, and would then pay 5% of the total cost for each subsequent month. Based on average spending per claim, 5% coinsurance translates to total out-of-pocket costs of $759 for each month in the catastrophic coverage phase in 2019, up from $711 in 2018. This increase amounts to approximately $50 more per month or $550 more per year (assuming a 5% coinsurance between February and December) for this one drug alone.

Among the 99 drugs used by more than 1 million Part D enrollees in 2019, half (45 drugs) had list price increases between 2018 and 2019 above the rate of inflation (Figure 3). Price increases for most of these commonly-used drugs with price increases above inflation (60%, or 27 drugs) ranged from 5% to 14%, or roughly 3 to 8 times the rate of inflation. For the remaining drugs (40%, or 18 drugs), price increases were above inflation but below 5%. The median list price increase across these 45 drugs was 5.7%.

Among the 45 drugs used by more than 1 million Part D enrollees with price increases that exceeded the rate of inflation, most (84%, or 38 drugs) are relatively low-cost generics with average total Part D spending per beneficiary of $150 or less (Table 2). This means that list price increases may not translate to substantially higher out-of-pocket costs, particularly since low flat dollar copayments are the norm for generic drug cost sharing in Part D. However, among the seven brand-name drugs on this list – ProAir, Eliquis, Symbicort, Xarelto, Synthroid, Ventolin, and Shingrix, each taken by at least 1 million Medicare Part D enrollees – price increases between 2018 and 2019 ranged from 3.0% (for Shingrix, the shingles vaccine) to 8.6% (for ProAir, an asthma drug).


This analysis shows that list price increases for many drugs covered by Medicare Part D exceeded inflation between 2018 and 2019, in some cases by a substantial amount. Our 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 or paid a rebate to the federal government if prices exceeded inflation, as was proposed in legislation during the 116th Congress and supported by President Biden during the campaign. The Congressional Budget Office (CBO) estimated 10-year savings from the drug inflation rebate provisions in Congressional legislation, amounting to $36 billion for H.R. 3 and $82 billion for the Senate Finance Committee legislation; 10-year savings would be lower under H.R. 3. because the inflation provision would not apply to drugs subject to the government negotiation process that would be established by that bill.

Capping the growth in Medicare Part D drug prices to no more than the rate of inflation is expected to slow the growth in Medicare Part D spending and premiums, and drug costs paid by beneficiaries for drugs that are subject to coinsurance, rather than flat copayments. For low-cost drugs, list price increases may have little practical effect on out-of-pocket spending by enrollees, especially when cost sharing takes the form of copayments. But for relatively expensive drugs, even relatively small percentage increases in list prices can translate to higher out-of-pocket costs for enrollees.

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. In that case, some Medicare beneficiaries could face higher out-of-pocket costs for new drugs that come to market, with potential spillover effects on costs incurred by other payers as well.

The analysis is based on data from the CMS’s most recent Medicare Part D drug spending dashboard. In this analysis, we use weighted average spending per dosage unit as the measure of list price, which is reported by CMS for each drug in the dashboard per year. Changes in list prices for Part D drugs are measured by the one-year (2018-2019) change in average spending per dosage unit amounts reported in the dashboard. We compare this to the rate of increase in the Consumer Price Index for all urban consumers (CPI-U) over the same time period, based on the values for CPI-U in July 2018 and July 2019. We analyze price changes for all drugs reported in the dashboard in both 2018 and 2019 (n=3,306 drugs), along with the top 25 drugs by total Medicare Part D spending in 2019 and the most commonly-used drugs in Part D in 2019 (defined as those drugs with more than 1 million users).

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