OIG-HHS examines negotiated discounts for Part D

by Ben Vernia | November 19th, 2010

In a report released on November 18, the Office of Inspector General of HHS described its examination of a sample of Medicare Part D plan sponsors’ contracts with Pharmacy Benefit Managers (PBMs) who, in turn, negotiate with pharmacy chains for discounts on drugs provided to Part D beneficiaries. The OIG noted that some PBM contracts are for a locked-in rate, while in others, the PBM passes discounts on to the plan sponsors. After noting that brand-name drug discounts tend to be computed from Average Wholesale Price, and that generic drug discounts tend to be greater and reward pharmacies through a higher dispensing fee, the OIG report concludes that the cost savings are not passed on to beneficiaries and the government (though the report does not specify how this occurs or attempt to quantify it).

The OIG noted that it will soon release another Part D report, titled “Concerns With Rebates in the Medicare Part D Program.” The agency appears to be still working to get a handle on Part D’s strengths and weaknesses.

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