Medicare Wastes Billions on Newer Drugs

By Marilynn Larkin

August 15, 2019

NEW YORK (Reuters Health) - Medicare could have saved close to $17 billion from 2011-2017 by substituting 12 older drugs (racemic precursors) for newer single-enantiomer drugs, and beneficiaries could have saved more than $1 billion in out-of-pocket costs, researchers say.

"Unfortunately, the findings did not surprise us," Dr. Joseph Ross of Yale School of Medicine told Reuters Health by email. "We undertook this study to better understand a clinical situation we were observing all too frequently in clinical practice: patients being prescribed more expensive, branded single-enantiomer drugs when less expensive, generic versions of their racemic precursors are available for use."

Single-enantiomer drugs are developed using a commercial manufacturing strategy called chiral switching. Manufacturers develop these drugs as a substitute for the already-marketed racemic version (a 50/50 mixture of two enantiomers). An example is esomeprazole (isolated S-omeprazole) for omeprazole (R- and S-omeprazole).

"Without evidence demonstrating that single-enantiomer drugs improve outcomes compared to their racemic precursors, substitution of these costlier drugs with their racemic precursors offers a clear opportunity for Medicare drug savings," Dr. Ross said.

The researchers searched the Drugs@FDA database to identify single-enantiomer drugs originating from a racemic precursor previously approved by the FDA, and analyzed Medicare (2011-2017) and beneficiary out-of-pocket (2011-2015) spending on those drugs.

To determine savings, they subtracted estimated Medicare spending (using average annual Medicare spending per user), and beneficiary spending (using average annual beneficiary cost share), if racemic precursors had been substituted.

As reported online August 12 in Annals of Internal Medicine, 12 single-enantiomer drugs were identified, two of which did not have generic versions of the racemic precursor available during the study period.

Between 2011 and 2017, Medicare Part D spending on the 12 single-enantiomer drugs totaled $19.3 billion. If racemic precursors had been substituted, Medicare could have saved $16.6 billion ($112.43 per prescription). For example, substituting lansoprazole for dexlansoprazole alone would have led to close to $2 billion in savings, or $189.34 per prescription.

If manufacturers had paid the average rebate rate of 17.5% reported by Medicare for all brand-name drugs in 2014 or the highest rebate rate of 26.3% for any therapeutic class, then $13.7 billion and $12.2 billion could have been saved, respectively.

Further, between 2011 and 2015, Medicare Part D beneficiaries filled 104.3 million prescriptions for the 12 single-enantiomer drugs, spending $1.6 billion out of pocket Had racemic precursors been substituted, they could have saved $1.1 billion ($11.02 per prescription). Taking the same example, substituting lansoprazole for dexlansoprazole would have resulted in out-of-pocket savings of $17.10 per prescription.

Dr. Stacie Dusetzina, Associate Professor of Health Policy and Ingram Associate Professor of Cancer Research at Vanderbilt University School of Medicine in Nashville, commented by email, "Some of the (single-enantiomer) drugs are very commonly used, and seniors could save a lot by using the generic."

To limit prescribing of single-enantiomer drugs, "It would be useful to provide information to clinicians at the time that they are prescribing that a lower-priced treatment is available," she told Reuters Health. "Health plans can also design their formularies to steer patients to the lowest cost treatment within a class. This might mean having a higher out-of-pocket cost for esomeprazole than for omeprazole, for example."

"Patients should also (be encouraged to) ask their pharmacists if there are cheaper options that they might consider when they are filling prescriptions," she noted. "We know that a lot of patients are paying full price for drugs when they fill them, partly due to the increased use of deductibles by many insurance plans."

"Prescribing less expensive and equally effective treatments can help reduce the financial burden on patients and increase the chances that they will take the medications they were prescribed," she concluded.


Ann Intern Med 2019.