Impact Story

Savings from drug waste funds a $1.2 trillion infrastructure bill

Oversized drug vials can lead to billions of dollars in excess spending across the U.S. health care system, and some evidence suggests this waste is deliberate by drug manufacturers.

In 2016, Dr. Peter B. Bach and colleagues published Overspending driven by oversized single-dose vials of cancer drugs, a paper showing how deliberately wasteful drug packaging of single-dose vials for pricey oncology drugs was estimated to result in nearly $1.8 billion in excess spending across the U.S. healthcare system. Shortly after this breakthrough publication, CMS imposed a drug waste identifier, known as a JW modifier, to track the amount of unused and discarded drug leftover from opened vials in hospitals and physicians’ offices. From the data collected using the JW modifier, Medicare spent $753 million on discarded drugs in 2019 alone. Including other public and private payers, it is estimated that $3 billion is spent each year on wasted oncology medications.

The substantial savings CMS could recoup has since been incorporated into the Recovering Excessive Funds for Unused and Needless Drugs (REFUND) Act (Sen. Durbin, D-IL), which requires manufacturers to provide rebates for the amount of drug wasted as determined by the JW modifier. In 2021, the REFUND Act passed the Senate in a bi-partisan 69 to 30 vote as part of a historic $1.2 trillion Infrastructure Investment & Jobs Act. The bill estimates $3 billion over 10 years from drug waste reimbursement that would offset some of the necessary infrastructure investment.

How Drugs Are Wasted

Infusion therapies are typically packaged in single-use vials for dosing regimens based on patient weight or body size. In the 2016 publication, Dr. Bach and colleagues analyzed spending of the top 20 infused cancer drugs and found that $254 million (6.5% of $3.9 billion) in Rituxan (rituximab) sales and $231 million (33% of $697 million) in Kyprolis (carfilzomib) sales were projected to be discarded, totaling $485 million for wasted drugs.

In another example, the average patient who received Velcade (bortezomib), available in 3.5 mg vials exclusively in the U.S., typically only required 2.5 mg per dose. The resulting 1 mg, which generated about $425 in revenue, was inevitably discarded. Interestingly, only 1 mg vials are sold in Europe, where reimbursement policies are more likely to restrict outsize pricing tactics.

Merck stopped distributing the original 50 mg vial of Keytruda (pembrolizumab), a cancer drug first approved in September 2014, and instead, introduced a larger 100 mg vial in February 2015. Changes in vial size can influence revenue; consider a 70 kg patient who requires a dose of 140 mg (pembrolizumab is dosed at 2 mg/kg). The 50 mg vials would leave 10 mg unused, while the 100 mg vials would leave 60 mg unused. Study results estimated that “the additional revenue to the company from the packaging change over the next five years will be $1.2 billion, which comes on top of the $1.2 billion  they would have gained from leftover drug with the 50 mg package”. The 50 mg package size is still sold in Europe.

This evidence supported the need for better policies to track and reduce vial waste and excess spending. Excess spending on discarded drugs benefits the manufacturer and burdens payers and ultimately patients, who are charged for product they do not use.

Tracking Discarded Drugs

One year after the 2016 publication, the Centers for Medicare and Medicare Services (CMS) required providers to report the amount of drug discarded through a JW modifier HCPCS code for all single-dose or single-use Part B drug. This policy also required providers and suppliers to document the amount of discarded drug in Medicare beneficiaries’ medical records.

Doubling Down on Drug Waste

Congress commissioned the National Academy of Science, Engineering, and Medicine (NASEM) to study and recommend policy solutions to combat concerns regarding the high cost of discarded weight-based drugs. NASEM argued that the price of the drugs reflects what they are worth to us, not how much the drug is used, and concluded Congress should not only allow manufacturers to retain the billions captured by packaging drugs inefficiently but that CMS should also lift the JW reporting requirement.

In response, Dr. Bach explained that manufacturers continue to hide the price of drug waste by providing misleading price signals, such as with Biogen’s highly publicized price announcement for Aduhelm (aducanumab). Biogen reported an annual cost of $56,000 for Aduhelm based on an average patient body weight of 74 kg, however, the Drug Pricing Lab’s analysis suggested the true annual cost of Aduhelm was closer to $61,000 to $62,000 per year, depending on age and gender distribution assumptions of the treated population. The difference in price would result in billions in profit for Biogen.

Savings Recouped from Drug Waste in Action

Prior to the REFUND Act in 2019, capturing drug waste data was just for research. U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Rob Portman (R-OH) proposed a bipartisan bill requiring manufacturers to rebate the amount wasted based on what was captured by the JW modifier back to CMS. The cost would be benchmarked off the Average Sales Price (ASP), or Wholesale Acquisition Cost (WAC) if ASP was not available.

The REFUND Act was passed by the Senate in 2021 through the Infrastructure Investing & Jobs Act, a $1.2 trillion bipartisan bill investing in roads, bridges, broadband internet, public transit, and electric utilities. The infrastructure bill included $550 billion in new funding, including a $3 billion offset by the rebates from manufacturers on wasted . Specifically, the bill requires “manufacturers of certain single-dose container or single-use package drugs payable under Part B of the Medicare program to provide refunds with respect to discarded amounts of such drugs” (pg. 2443).

“When we talk about the cost of a drug, we’re often not talking about this waste,” said Peter Bach, in a Bloomberg Law article. “This is a lot of money the drug industry has been capturing for years.”

Ideally, this provision could motivate manufacturers to envision more efficient vial size packaging and pricing. “I am pleased that this provision from our bipartisan REFUND Act will help save patients and Medicare billions of dollars,” said Sen. Durbin (D-IL) of the bill.

 

Key Takeaways

An analysis by Dr. Bach, et al. found that oversized vial waste in top cancer drugs Velcade (bortezomib), Keytruda (pembrolizumab), Avastin (bevacizumab), Opdivo (nivolumab), Rituxan (rituximab) and 15 other infusion cancer drugs cost the US health care system nearly $1.8 billion in excess spending in 2016.

In 2017, CMS implemented the JW modifier hospital procedure code to track drug waste in hospitals and physicians’ offices.

In 2019, Senator Durbin (D-IL) introduced the REFUND Act, requiring manufacturers to rebate the amount spent on drugs wasted based on the JW modifier to CMS. This bill was rolled into the Infrastructure Investment & Jobs and passed the Senate in a bi-partisan vote in 2021.

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We conduct non-partisan, independent research, and make our work accessible and informative to policymakers and the general audience alike. Browse our featured research or explore our work by article type.

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