Generics More Costly Than Brand-name Drugs? Sometimes, Under Medicare Part D

Debra L Beck

July 03, 2019

Medicare Part D enrollees may often be paying higher out-of-pocket costs for some generic drugs than their brand-name counterparts, according to a study published in the July issue of Health Affairs.

The problem is likely to be common for individuals prescribed high-priced specialty drugs used to treat rare or complex conditions, such as cancer, rheumatoid arthritis, and multiple sclerosis, if the price differences between the brand-name drug and the generic are small, the analysis suggests.

This unfortunate situation was created from piecemeal changes made to pricing and payment policy over the years that were intended to limit out-of-pocket costs for patients but have instead had unintended consequences, health economist and lead author Stacie B. Dusetzina, PhD, Vanderbilt University, Nashville, Tennessee, told | Medscape Cardiology.

"Congress needs to fix this so that when people take a generic drug they can be confident that they're paying less for it than they would for the branded drug," she said.

Dusetzina and her colleagues looked at differences in brand-name and generic or biosimilar drug prices, formulary coverage, and expected out-of-pocket spending across all of the Medical Part D plans available in the United States in the first quarter of 2018.

In 2019, they found, someone using brand-name drugs who reaches the donut hole, or coverage gap, would have to spend $982 to get to the catastrophic coverage phase, whereas a patient using generic drugs would have to spend $3730 to reach that point.

"The Affordable Care Act closed the donut hole, but one of the ways it did this was by requiring drug manufacturers to give a branded drug discount for drugs purchased in the donut hole. Originally it was a 50% discount and now it's 70%," said Dusetzina.

"The reason this matters is because this discounted amount counted as part of the enrollees' out-of-pocket spending, which helps users reach their spending limit and move out of the donut hole to the catastrophic-coverage part of the benefit faster and with fewer actual dollars spent. The issue is that branded drugs often have rebates, but generics don't," she explained.

"This is sending a terrible message. We don't want people using branded drugs; we want them using generics because we want those savings to be achieved by both health plans and patients, and we want to encourage competition in the generic marketplace," said Dusetzina.

The study also notes that policy changes set to take effect in 2020 will only make the situation worse because they increase patient out-of-pocket spending requirements for the catastrophic-phase coverage from $5100 to $6350.

"This research is really important," said Walid F. Gellad, MD, MPH, to | Medscape Cardiology. Gellad is director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh Medical Center.

"We're not talking about the $5 or $10 generic statins and blood pressure drugs that we tend to think about, but rather generics like glatiramer, which is priced just a little below the brand name Copaxone…. These drugs have gotten very expensive, but these are the generics of the future, so we need to get this figured out," he said.

High-Priced Generics and Discounted Branded Drugs

For some drugs, for example Crestor (rosuvastatin), it all works as it should. The median point-of-sale price for a month fill of Crestor in 2018 was $267. Generic rosuvastatin runs about 94% less, at $16 a month, the report notes. Even if the brand-name maker were to offer a discount, the generic would still be better priced.

Reflective of this, 97.6% of Part D formularies cover generic rosuvastatin, and 18.1% cover brand name Crestor; some cover both.

"This is what we're thinking when we talk about the promise of generic drugs. In the rosuvastatin example, it works as it should," Dusetzina said.

But when the researchers considered some more expensive generics — not biosimilars, for which this issue was fixed by the Bipartisan Budget Act of 2018 — the price differences are smaller once the branded drug's discount is factored in.

"These are specialty generics, they are pills and are relatively easy to manufacture, but they have a high price point and relatively smaller patient population," said Dusetzina.

An example is Gleevec/imatinib, used to treat certain cancers. The median monthly price for Gleevec in 2018 was $10,604, with the generic imatinib reduced by only 24% to $8054.

With such a small differential in pricing, if the brand-name drug is discounted in the donut hole, with that amount counted as out-of-pocket spending, the patient who is receiving the undiscounted generic version could end up paying far more than one who takes the branded option, the report observes.

"It basically means that we have people overpaying for high-priced specialty generic products, which is not what we want to see happen," Dusetzina said.

"When the benefit was designed, we didn't have these very high-priced products with similarly priced generic versions. But now the Part D benefit needs a redesign so that it works for people needing expensive drugs."

Gellad added that simply pushing generic prices lower may not be the right solution because it may result in shortages if too few manufacturers enter the market.

Dusetzina disclosed receiving funding for related projects from the Laura and John Arnold Foundation, the Leukemia and Lymphoma Society, and the Commonwealth Fund. Gellad reports having no relevant conflicts.

Health Aff (Millwood). 2019;38:1188-1194. Abstract


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