Avalere study: Generics tiers could save patients $4.1 billion in 2019

A new report from Avalere is taking a look at how, as generic drugs are placed on higher, non-generic tiers, patient cost sharing for these medications can increase.

The report, follows the news in late January that the Centers for Medicare and Medicaid Services would be considering changing the Medicare Part D tier formulary guidelines, potentially reversing the change allowed beginning in 2017.

Under the proposal, CMS would prohibit or discourage Medicare Part D plans from placing generic drugs on brand tiers and vice versa, as well as eliminate the non-preferred drug tier. CMS’ stated goal of the policy is to help lower patient out of pocket costs for beneficiaries, increase generic utilization, and avoid beneficiary confusion around tier naming.

In its analysis, Avalere estimated the potential savings for patients under this proposed policy as well as estimated implications for Part D plan liabilities, using Part D prescription drug event data from 2016 to 2017 and CMS’ Public Use Files with Part D benefit and formulary design information for 2016–2019.

Avalere’s report found that as generic drugs are placed on higher, non-generic tiers, patient cost sharing for these medications can increase. Under the benefit design requirements in Medicare Part D, beneficiaries generally pay more cost sharing for drugs placed on tiers for brand drugs (i.e., Tiers 3 and 4) than on tiers for generic drugs (i.e., Tiers 1 and 2).

In an analysis of cost sharing for 2019 Medicare Part D prescription drug plans, Avalere found that the two generic tiers had a weighted average cost sharing of $2 and $7 respectively. Branded tiers had substantially higher cost-sharing, with the non-preferred drug tier averaging 39% coinsurance.

According to Avalere, most Medicare Part D Prescription Drug Plans charge coinsurance for the preferred brand tier (average of 21% in 2019), while most Medicare Advantage prescription drug plans charge copayments for Tier 3, preferred brand drugs (average of $37.38 in 2019).

To estimate the potential for patient out of pocket savings due to the CMS proposal, Avalere determined the difference in cost sharing if generic drugs covered by the plan, utilized by beneficiaries, and placed on non-generic tiers, were moved down to the highest generic tier.

Assuming constant utilization and plan formulary management, the difference is the estimated cost-sharing amount that could be saved by Part D beneficiaries, or the federal government in the case of low income Medicare Part D beneficiaries with subsidized cost sharing, using generic drugs under the CMS potential policy of using separate tiers for brand and generic drugs.

Other key findings of the report include the following:

  • Patient cost sharing would have been $15.7 billion lower for generic drugs from 2016–2019 under CMS’ potential policy to require Part D plans to place generics only on generic tiers.

  • On aggregate, patient cost sharing would have been $15.7 billion lower for generic drugs from 2016–2019 under this potential policy, averaging $3.9 billion per year as a result of placing generic drugs on lower tiers. The placement of a substantial number of generic medications on non-generic tiers, leads to higher out of pocket spending for generics not currently on generic tiers.

  • Beneficiaries taking antidepressant drugs were estimated to save the most in cost sharing, followed by those taking antipsychotics and cardiovascular.

  • Generic drugs in Medicare Part D have experienced a shift from nearly exclusive placement on generic tiers prior to 2012 to nearly evenly divided placement between generic and non-generic tiers in 2019.

“That trend, encouraged by the creation of the non-preferred drug tier in 2017, has resulted in higher beneficiary cost sharing for generic medications over time, reducing the incentive for beneficiaries to take lower priced generic medications. As CMS considers options to incent lower-priced medications to reduce out of pocket costs in the Part D program, a requirement for generic drugs to be covered only on generic tiers could achieve this objective, saving patients who take generic drugs an estimated $4.1 billion in 2019,” Avalere said.

The Association for Accessible Medicines said Avalere's report “is further evidence that America’s patients are
needlessly spending too much out-of-pocket for affordable generics. Since 2015, seniors have paid nearly $22 billion in additional out-of-pocket costs for their prescription drugs in Medicare.”

Additionally, AAM applauded the Trump Administration for “taking bold steps to course-correct this problem” and said, “We encourage CMS to implement its proposal to place generic medicines on generic tiers. The proposal would increase access, reduce patient confusion and save our nation’s patients more than $4 billion per year.”