How a simple fix to Medicare Part D could save seniors and the U.S. healthcare system billions

Prescription drug costs and access to generics have become leading debate topics among policymakers, pundits and healthcare providers alike — and at the heart of this conversation are America’s seniors.

Today, more than 43 million seniors rely on Medicare Part D benefits, 12 million of whom are low-income or near poverty level.¹ Meanwhile, many of these seniors face heightened out-of-pocket costs at the pharmacy counter. As seniors begin to re-enroll in their Medicare plans this fall, many are faced with the difficult decision of choosing between daily necessities — rent, electricity, food — and costly prescriptions.

But these high price tags for prescriptions weren’t always the norm with Part D plans. When Congress first established Medicare Part D in 2003, the legislation revolutionized the healthcare system by offering beneficiaries coverage for prescription medicines and providing increased access to generic medicines. The Association for Accessible Medicines estimates that generics generated $2 trillion in savings over the last 10 years.² The average out of pocket cost for seniors is less than $6 per prescription versus more than $40 on average for brand name drugs.² Generics allow seniors and those living on fixed incomes to obtain the prescriptions they need at lower costs.

But the progress Part D presented is now under threat. Here’s why:

When Part D first came to fruition, generics were included on formularies immediately after launch. But in recent years, generics have been increasingly kept off Part D formularies after launch due to changes in Part D plan benefit design and rebates that prefer brands over lower cost generics. Even when they are added, it often takes years for their inclusion, or they are wrongly placed in non-generic tiers alongside the name-brand drugs, resulting in significantly higher copays for patients.

In fact, a study conducted by HHS found that Medicare Part D would have saved $3 billion if available generics had been dispensed instead of the brand drug. And don’t forget beneficiaries, who spent $1.1 billion out of pocket for these brand drugs when they could have spent much less with generic versions.³

“Since 2016, the top 10 Part D plans only covered first-generics within the first year of generic launch just 50% of the time. When the lower-cost generic was finally added to formulary—which could be years after launch—the generic often was not added to a generic tier, but rather to a branded drug tier with higher out-of-pocket costs,” explains Marcie McClintic Coates, head of global policy at Mylan. “This is a very concerning trend, one that threatens the United States’ record of having the highest generic drug utilization rate in the world.^”

And while the record number of new generics entering the market should be bending the cost curve and helping Americans at the pharmacy counter, seniors are no longer getting the benefits of newly approved and lower-cost generics.

It’s clear that Congressional action is needed to ensure Part D beneficiaries receive the full benefit of lower-cost generics and biosimilars through policies that reduce out-of-pocket costs. But what does that action look like?

Here are three simple steps that can be taken to help mend this break in the U.S. healthcare system.

1. Grant access to generics upon launch. Recent analyses estimate that if Congress required generics and biosimilars to be included on Part D formularies upon launch following FDA approval, over the course of 10 years Medicare Part D beneficiaries would save at least $850 million at the pharmacy.⁴ Additionally, the government would save at least $6.6 billion, simply based on the number of generics launched since 2016 that were not added to Part D formularies upon launch.⁴ To provide seniors full-spectrum access to lower cost medicines, when a new generic launches in the United States, they should be immediately included on Part D formularies.
2. Treat brand names as brand names, and generics as generics. Despite the fact that generic prescription drugs cost significantly less than name brand drugs, Part D plans treat both the same when it comes to determining what out-of-pocket rate patients will be charged — folding both into the same high cost formulary tier. In fact, recent studies found that seniors paid nearly $22 billion more in out-of-pocket costs when their lower-cost generic was placed in the higher-cost tier.⁵ Separating brand names and generics into different formulary tiers would help save seniors billions in out-of-pocket costs, all while encouraging further competition to help bring down high drug prices.
3. Create a dedicated specialty tier for generics and biosimilars. Today, if you’re a Part D beneficiary and taking a specialty drug, you don’t have the benefit of a designated tier for specialty generics or biosimilars, which means you have no lower cost-sharing option. This is likely because when the Medicare Modernization Act of 2003 was created to include specialty drugs in Part D, specialty generics or biosimilars didn’t exist in the US. Modernizing the specialty formulary tier by adding generic options will help provide lower out-of-pocket costs to seniors who depend on these important and life-altering medications. Seniors could save more than $11 billion and the government could save nearly $12 billion over 10 years just by creating a dedicated formulary tier for specialty generics and biosimilars.⁴

Ensuring that seniors receive the prescriptive care they need requires an infrastructure that promotes access to generic medicines, clear separation of generic and name brands in tier structure, and the creation of a specialty generic and biosimilar tier that allows seniors to pay less out-of-pocket for their complex and chronic prescription drug needs. Only then can the millions of Americans who rely on Part D benefits gain fair and full-spectrum access to the exhaustive number of low-cost medicines on the market today.

To learn more about Mylan’s policy solutions to ensure patients get the benefit of lower cost generic medicines and biosimilar treatments, visit https://mylanbetterhealth.com/en/us/public-health-policy.

¹https://www.kff.org/medicare/issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-and-cost-sharing/
² 2019 AAM Savings Report (https://accessiblemeds.org/resources/blog/2019-generic-drug-and-biosimilars-access-savings-us-report)
³ HHS ASPE Report: Savings Available Under Full Generic Substitution of Multiple Source Brand Drugs in Medicare Part D (July 23, 2018); https://aspe.hhs.gov/system/files/pdf/259326/DP-Multisource-Brands-in-Part-D.pdf
⁴Data on File with Mylan
⁵Avalere “Generic Drugs in Medicare Part D, Trends in Tier Structure and Placement Study,” May 22, 2018; Avalere “Medicare Part D Generic Drug Tiering Request for Comment: Implications for Patient Out‐of‐Pocket Spending and Part D Plan Costs,” February 28, 2019, available at https://avalere.com/wp-content/uploads/2019/02/20190228-White-Paper-Part-D-Generic-Tiering.pdf