Gaming of Part D generic drugs passes more costs on to seniors

Seniors Pay More For Generics in Medicare Prescription Drug Plans Despite Stable Prices

By Clara Son
Avalere, May 22, 2018

New research from Avalere finds that seniors with Medicare prescription drug plans (Part D) pay more for generic drugs even as the market price of these drugs stays stable.

Avalere experts note that seniors are paying more because generic drugs are being placed on higher formulary tiers where patients pay more out of pocket for drugs. The number of generic prescription drugs placed on the lowest tier, where patients pay less for their drugs, declined 53 percentage points between 2011 and 2015. This shift resulted in a 93% increase in total patient cost sharing for these drugs, or a total of $6.2 billion.

This higher cost sharing and movement of generics to higher tiers did not correspond with an increase in the underlying price of generic drugs over that same time period, according to an analysis by Avalere experts of the average volume-weighted price of generics that were included on plan formularies in both 2011 and 2015.

In 2011, 71% of generic drugs were placed on tier 1, the lowest tier in the formulary. By 2015, 19% of covered generics were placed on tier 1, while 46% were placed on tier 2 and 35% were placed on tier 3 or higher. This shift represents a 53 percentage point decrease in the number of generics being placed on the lowest tier between 2011 and 2015.

The use of generic drugs has saved the Medicare Part D program billions of dollars. However, higher tier placement of generic drugs is leading to higher out-of-pocket costs for patients and may reduce savings.

In response, the Pharmaceutical Care Management Association (PCMA) released the following statement which still does not refute the fact that the industry moved more expensive generics into non preferred tiers in order to keep Part D premiums competitive:



By Don McCanne, M.D.

This report confirms that the industry shifted over half of generic drugs out of the lowest tier into higher tiers wherein patient cost sharing is higher. This benefits the pharmacy benefit managers because the shift in costs to the patients allows them to keep the Part D premiums more competitive, but it certainly has an adverse impact on seniors who are dependent on generic medications that are supposed to be cheaper than the brand names.

In fact, it has been reported that the cost sharing of generic drugs is sometimes greater than the full price of the generic if it were purchased without using the insurance, and the pharmacy benefit managers may have gag clauses prohibiting the pharmacist from telling the patient that it would cost less if they didn't use their insurance. Would you call this nefarious?

This is one more example of how the private sector takes good care of the industry itself while using the patients as pawns. Not only are prices high, insurance premiums are unaffordable for many, and they also shift more costs to patients' pockets as they take away their choices in health care, whether through narrow provider networks or through unaffordable deductibles and other cost sharing. To add to the insult, we pay more because of the high costs of administering these shenanigans.

Through a well designed, single payer, improved Medicare for all we would have the full range of choices in health care with no need for the patient to share costs of the health care services and products at the point of service. When people need care, they simply get the care they need. And, of course, everyone is included for life, and we can do that without spending any more than we already do by using equitable public financing.

Now explain again the basis of those disingenuous arguments that are going around that this approach is not feasible. It is the only approach that is feasible if we want everyone to have affordable health care.

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