How to Reduce Medicare Drug Costs

Prescription drug spending in Medicare has been rising fast, but it is not completely clear what policies are driving the increases. The Obama administration hopes to find ways to control costs by testing different approaches to paying for the drugs.

The experiments would apply to a class of drugs covered under Medicare Part B that are administered in doctors’ offices and hospitals to treat cancer, rheumatoid arthritis and other conditions. The government and the program’s beneficiaries spent nearly $21 billion on these medicines in 2013, 29 percent more than in 2007, according to a Government Accountability Office report published in November. A big part of the reason spending has shot up is that drug prices have been going up faster than inflation or overall medical costs.