Medicare Part D faces rising costs driven in part by significant market consolidation, experts say, challenging the original premise that private competition would help control drug prices within the program. Two decades after its establishment to expand coverage of self-administered medicines for Medicare beneficiaries, the market dynamics have shifted, leading to sharp increases in spending and reduced competition.

According to recent data from the Medicare Trustees, spending on Medicare Advantage and Part D has risen substantially, with Part D costs growing particularly rapidly. This increase is attributable not only to higher drug prices but also to structural changes within the pharmaceutical supply chain. Wholesalers have merged into a few dominant national entities, and pharmacy benefit managers (PBMs) have absorbed many competitors. Moreover, insurers have increasingly integrated vertically, acquiring PBMs, specialty pharmacies, physician practices, and other components of the drug distribution network.

This vertical integration creates a scenario in which a single corporate entity can simultaneously insure patients, determine drug formularies, negotiate rebates, distribute medications, and allocate profits across its business units. Experts caution that such internal transactions within corporate families reduce the effectiveness of market mechanisms to establish transparent pricing.

A medical oncologist involved in cancer care highlights that specialty medicines, once a minor segment, now form a central part of treatment. The consolidations in the supply chain have led to narrower patient choices, delays in accessing medications, inconsistent adherence, and opaque cost structures that patients struggle to understand.

Given these challenges, some policymakers and healthcare professionals argue for a federal backstop to ensure access, particularly in rural areas where market options are limited. However, they emphasize that such interventions should serve as a foundational safety net rather than replacing competitive forces.

Recommendations to address the growing instability in Medicare Part D include pairing temporary financial stabilization measures with policies aimed at increasing transparency, such as enforcing transparent transfer pricing and modernizing risk corridors. Additionally, there is a call for regulatory reforms that would restore independent competition throughout the pharmaceutical supply chain, countering the current trend of market consolidation.

Stakeholders assert that reinforcing the marketplace, rather than layering additional subsidies onto an increasingly consolidated market, is essential to sustaining Medicare Part D’s long-term viability and protecting patient access to necessary medications.