January 19, 2018

How generics could have saved Medicare Part D $3.4B

Daily Briefing

    CMS could have saved nearly $3 billion over four years if Medicare Part D substituted generic drugs for brand-name medications on the formulary exclusion lists of the two largest pharmacy benefit managers (PBMs) in the United States, according to research letter published Tuesday in JAMA Internal Medicine.

    Medicare 101: Cheat sheets for Parts A through D

    Research letter details

    For the research letter, Yale University researchers sought to determine how PBM formulary exclusion lists—which identify brand-name medications ineligible for coverage and specify alternative, lower-cost brand-name or generic medications eligible for coverage—could work when applied to Medicare. The researchers analyzed formulary exclusion lists for CVS Caremark for 2012 through 2015 and Express Scripts for 2014 and 2015, as well as Medicare Part D drug utilization and spending data from 2012 through 2015. They identified 62 unique drugs with a total of 151 generic substitutes.

    Findings

    The researchers determined that CMS spent a total of $3.6 billion on 62 exclusion-listed medications from 2012 through 2015, but could have saved $2.9 billion by substituting the generic medications. The researchers found that the potential savings increased over the years as the number of excluded drugs increased. As a result, the researchers found potential savings rose from $138.4 million in 2012 to $1.2 billion in 2015.

    The researchers also found significant potential savings for Medicare Part D beneficiaries. They estimated that low-income subsidy beneficiaries could have potentially saved $14.8 million by substituting the excluded medications with generic medications, while non–low-income subsidy beneficiaries could have potentially saved $479.1 million by switching to generic medications.

    Overall, the researchers wrote that Medicare and Medicare beneficiaries could have a saved a total of $3.4 billion from 2012 to 2015 by substituting the excluded medications with generic medications.

    Discussion

    The researchers wrote, "Although formulary-excluded drugs represent only a small number of brand-name medications for which lower-cost generic medications might be substituted, and the potential 2015 savings represented only 1% of CMS prescription drug spending, our findings suggest clear opportunities to reduce costs using strategies already in place at large PBMs" (Kacik, Modern Healthcare, 1/17; Egilman et al., JAMA Internal Medicine, 1/16; MedPage Today, 1/16).

    Medicare 101: Cheat sheets for Parts A through D

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