AAM: Medicare Part D plans slow to adopt generics

Regulatory NewsRegulatory News | 19 July 2021 |  By 

Medicare Part D plans are slow to adopt generic medications for their beneficiaries, according to a recent report released by the Association for Accessible Medicines (AAM).
For the 2021 plan year, Medicare Part D formularies covered 21% of approved first generic medications from the previous year compared with the 66% covered by commercial formulary plans, the report stated. But this is part of a years-long trend, according to AAM. Not only do Medicare Part D plans cover fewer first generics, but there is also a nearly 3-year gap on average before at least half of Medicare Part D formularies cover a newly approved first generic, the organization said.
The analysis in the new AAM report, “New Generics Are Less Available in Medicare Than Commercial Plans,” was performed based on drug formulary and benefit design data collected by Managed Markets Insight & Technology between 2016 and 2021. More than 600 commercial formularies were analyzed in the report in addition to Medicare Part D.
When Medicare Part D formularies do cover first generics, AAM noted, the drug is often placed in a non-generic brand tier more likely to result in higher cost-sharing on the part of beneficiaries. This is in contrast to 98% of commercial plans that placed covered first generics in a lower-cost tier.
“While formulary coverage is an important step to guarantee patient access to more affordable prescription drugs, tier placement continues to be a barrier,” AAM said in the report. “Proper tier placement is critical to realizing the full value of generic drugs and incentivizing generic competition.”
‘Skewed incentives’ in Medicare Part D
In a blog post, AAM argued that Medicare Part D—in particular the Coverage Gap Discount Program and low health liability with catastrophic coverage—is designed with “skewed incentives.”
“These create a powerful incentive for plans to prioritize higher-cost brand drugs over generics, even when those generics cost less and even if it means that the Medicare program will pay more,” AAM wrote in the post.
These incentives are present in both commercial and Medicare plans, such as brand rebates. “However, these barriers are amplified in Medicare, where the structure of the Part D benefit undermines patient adoption, harming generic competition and depriving patients of access to lower-cost medicines,” AAM explained in the report.
For example, when the Coverage Gap Discount Program counts discounted brand drugs as out-of-pocket spending, it pushes high-cost Medicare Part D beneficiaries into catastrophic coverage more quickly, where the government then subsidizes most of the drug cost, AAM noted. “This is a powerful incentive for plans to advantage higher-cost brand drugs over generics, even when those generics cost less and even if it means the Medicare program will pay more,” they said.
AAM called on Congress to modernize the Medicare Part D program, specifically asking for the elimination of the Coverage Gap Discount Program and prohibition of counting brand discounts as out-of-pocket spending for beneficiaries. They also suggested first generics and biosimilars be reviewed for inclusion in Medicare Part D plans within a specific timeframe and that written justification should be issued to Centers for Medicare & Medicaid Services for why a drug is not covered in a formulary post-review. Decreasing biosimilar and generic plan liability “relative to the reference brand” as well as “decreasing government reinsurance and increasing plan liability in the catastrophic phase” could also help incentivize lower-cost medicine use, they noted.
Regarding tier selection, AAM suggested a new specialty tier be created for generics and biosimilars that has lower cost-sharing. Additionally, Congress should limit or restrict the placement of generic drugs on non-generic tiers, AAM said.
“Today’s report reveals persistent design flaws within Medicare Part D that act as barriers to coverage of and access to recently approved, low-cost generic drugs. There’s simply no justification for providing America’s seniors worse access to lower-cost generics than beneficiaries in commercial health plans receive,” Christine Simmon, senior vice president for policy and strategic alliances at AAM and executive director of the Biosimilars Council, stated in a press release. “This analysis provides critical data illustrating how crucial first generics are in driving drug prices down and how coverage within Part D plays a key role in ensuring patients reap their full benefits.”
AAM: New Generics Are Less Available in Medicare Than Commercial Plans


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