A Medicare Drug Cost Crisis Is Quietly Accelerating

Why It Matters

A new Congressional Research Service report lays bare the explosive growth in Medicare Part B drug spending and the competing political forces now fighting over who controls the fix.

The numbers are stark. Between 2008 and 2021, per-enrollee spending on Medicare Part B drugs grew at more than three times the rate of Medicare Part D drug spending and at four times the rate of prescription drug spending in the United States generally. That is not a rounding error. That is a structural problem embedded in how the federal government pays for some of the most powerful and expensive medicines in modern medicine.

Medicare Part B drug coverage encompasses drugs that patients cannot simply pick up at a pharmacy. These are medicines administered in doctors' offices and hospital outpatient departments: chemotherapy infusions, immunology treatments, drugs delivered through medical equipment at home, vaccines, and blood clotting factors. They are, by definition, drugs that often treat the sickest patients: cancer patients, dialysis patients, and people with rare and complex diseases. And the bill is growing fast.

A newly updated Congressional Research Service report on Medicare Part B drugs, released in late May 2026, offers Congress a detailed roadmap of the problem and a window into just how contested the solutions have become.

The Big Picture

For most Medicare Part B injectable drugs and physician-administered treatments, the federal government reimburses providers at a rate of 106% of the Average Sales Price, a formula known as ASP+6%. The ASP is a volume-weighted average of what manufacturers actually charge in the market, net of discounts. Manufacturers report that data to the Centers for Medicare & Medicaid Services quarterly, with a two-quarter lag built into the system.

The 6% add-on is meant to cover the cost of acquiring, storing, and administering the drug. But critics have long argued the formula creates a perverse incentive: because the add-on is calculated as a percentage of price, providers receive a larger absolute payment for prescribing a more expensive drug. The system, in other words, may structurally reward high-cost prescribing.

Where the Money Is Going

Over half of all Part B drug spending in 2023 was concentrated in just three therapeutic categories: anti-cancer drugs (antineoplastics), ophthalmic agents, and skin substitutes. The CRS report flags that spending on skin substitutes has risen sharply in recent years, a trend regulators are now trying to address by changing how certain products are reimbursed, moving some away from the ASP methodology entirely.

Meanwhile, an increasing share of Part B drug administration costs is being driven by hospital outpatient departments, which have become a dominant site of care for these treatments. That shift matters for cost because hospital outpatient facilities typically receive higher reimbursements than independent physician offices for the same services.

The Biosimilar Bet

One of the more significant policy levers embedded in the CRS report involves biosimilars: lower-cost alternatives to expensive biologic drugs. Under the Inflation Reduction Act of 2022, Congress temporarily increased the payment rate for biosimilars to ASP+8% of the reference product's price, running through the fourth quarter of 2027. The goal is to make biosimilars financially attractive enough that providers will actually prescribe them, creating price competition that, over time, could drive down the cost of the high-cost biologics that have been a primary engine of rising Part B drug spending.

Whether that bet pays off and whether the incentive is extended beyond 2027 is now a live legislative question.

Political Stakes

For the Administration

The Trump administration inherited and is now obligated to administer the Medicare Drug Price Negotiation Program created by the Biden-era Inflation Reduction Act. Under that program, the Secretary of Health and Human Services gained the authority to directly negotiate prices for high-expenditure Medicare drugs. Part B drug coverage became eligible for negotiation in 2026, and five high-cost Part B drugs have already been selected. Their negotiated prices are set to take effect in 2028.

This creates an awkward political reality. The administration has shown little enthusiasm for the IRA's broader architecture, and the FY2025 reconciliation law, passed under the current Congress, already expanded the number of drugs excluded from negotiation, a clear signal of the direction Republican leadership wants to travel. But unwinding the negotiation program entirely would mean abandoning one of the few concrete mechanisms currently in place to reduce Medicare drug administration costs - a politically treacherous position given public anxiety about drug prices.

The administration is simultaneously pursuing a parallel track through the CMS Innovation Center, which has issued a proposed rule for the GLOBE model, a demonstration program that would benchmark certain high-expenditure Part B drug prices against international prices. This builds on the inflation rebate structure created by the IRA, but goes further, potentially tying American reimbursement rates to what peer nations pay. The concept echoes the "Most Favored Nation" pricing model floated during Trump's first term that was ultimately blocked. Whether GLOBE survives legal and industry challenges remains deeply uncertain.

For Republicans

The CRS report lands in the middle of an active legislative battleground. House Republicans are advancing H.R. 4299, the Protecting Patient Access to Cancer and Complex Therapies Act, which would preserve the 106% ASP payment to providers for negotiated drugs, essentially insulating oncologists and other specialists from any reduction in their reimbursement, while routing the savings from negotiated prices back to the government as manufacturer rebates rather than as reduced provider payments. The bill reflects intense lobbying from oncology and specialty care providers who argue that cutting the provider-side payment threatens patient access to complex treatments.

Senate Democrats, meanwhile, are backing S. 1836, the SMART Prices Act, which would expand the number of drugs subject to negotiation each year, in the opposite direction entirely.

For Democrats

Democrats built their 2022 midterm message in part around the IRA's drug pricing provisions. The CRS report's documentation of accelerating Part B drug spending growth gives them a ready-made argument that the negotiation program needs to be expanded, not curtailed. But the political terrain has shifted: with Republicans controlling both chambers and the White House, Democrats are in a defensive posture, trying to prevent rollbacks rather than advance new coverage.

For Patients

Lost in the legislative maneuvering is a straightforward and serious consumer issue. Medicare beneficiaries enrolled in Part B drug coverage generally pay 20% coinsurance on these drugs after meeting their deductible, with no cap. For a cancer drug that costs tens of thousands of dollars per infusion, that 20% can translate into catastrophic out-of-pocket exposure. The CRS report notes that insulin carries a fixed $35 copayment and preventive vaccines carry no cost-sharing, but for the majority of high-cost Part B drugs, the 20% structure remains intact. Neither party has made closing that gap a legislative priority in the current session.

The Bottom Line

Two things stand out from this CRS report above all else.

First, the growth in Part B drug spending is not a future problem: it is a present one, accelerating faster than nearly any other category of federal health expenditure. The drugs driving that growth are the ones treating cancer, rare diseases, and complex chronic conditions. They are not discretionary. Patients depend on them. That makes the political cost of any serious reform extremely high, which is precisely why Congress has spent years layering partial fixes (biosimilar incentives, negotiation programs, international benchmarking proposals) on top of a payment architecture that has never been fundamentally restructured since 2005.

Second, the Medicare drug costs debate is no longer primarily about whether to act: it is about who bears the pain of cost control. Manufacturers, providers, and patients are all being asked to absorb some share of the savings, and each has powerful advocates in Congress. The negotiation program shifts costs to manufacturers. H.R. 4299 protects providers. Neither does much for the beneficiary, writing a 20% coinsurance check for a $50,000 infusion.

The CRS report does not take sides, but in laying out the mechanics of how Medicare Part B drug coverage works and the speed at which costs are compounding, it makes one thing unmistakably clear: the status quo is not sustainable, and the window for a durable legislative solution is narrowing.