Did Medicare really spend so much on Nexium? Not after rebates

New numbers on federal drug spending may say something about prescribing patterns for Medicare patients. Perhaps too many scripts for branded Nexium, when a generic stomach acid reducer might do, for instance.

But as Matthew Herper points out at Forbes, the numbers don't say as much about actual drug revenue.

For a reality check on numbers released by the Centers for Medicare and Medicaid Services, Herper compared the CMS spending figures with drugmakers' reported sales. And in Nexium's case, the numbers don't match up. CMS says it laid out $2.5 billion on the AstraZeneca ($AZN) stomach med in 2013--but AstraZeneca reported only $2.1 billion in U.S. sales that year.

That $2.1 billion obviously includes plenty of scripts for patients not covered by Medicare--including those covered by Medicaid and private insurers, and the uninsured. U.S.-based pharmacy benefits manager Express Scripts ($ESRX), for instance, says it spent $23.76 per member on Nexium in 2013--more than it spent on any other small-molecule med.

Herper figures CMS probably shelled out less than $1 billion on Nexium in 2013. The difference between CMS' $2.5 billion total and that share of AZ's U.S. sales? Rebates. Drugmakers pay mandatory rebates on Medicaid and Medicare meds, with Medicaid rebates a bigger share of the list price. In its report, CMS notes that the rebates aren't accounted for in the spending figures.

Under Herper's guesstimates--attained by comparing IMS Health sales data to AstraZeneca's reported sales--those rebates could have reached 60% or more.

The differences between CMS' numbers and company sales figures aren't as pronounced for drugs that lack competition from other brands that have gone generic or over-the-counter--which, in Nexium's case, would include older proton pump inhibitors such as the Pfizer ($PFE) brand Protonix (pantoprazole) and Prevacid (lansoprazole), sold by Takeda and Abbott Laboratories ($ABT). And as of January, Nexium has head-to-head generic rivals, too.

Herper mentions Teva's Copaxone as one of the brands whose reported sales align more closely to IMS sales numbers. He calculates a 17% discount on the multiple sclerosis med for 2014. Teva reported $3.2 billion in Copaxone sales in the U.S. in 2013, and CMS says Medicare paid $1.1 billion for the drug--a more logical share of Teva's total. Teva is trying to keep those rebates low, too, with a knockdown, drag-out legal fight against Copaxone knockoffs.

- see the Forbes analysis
- check out the CMS report

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