Medicare Part D Plans are Slower to Cover First Generics

When Medicare D plans do provide coverage for first generics, they are often placed on non-generic tiers.

It takes nearly three years before first generics are covered on more than half of Medicare Part D formularies, according to a new paper by the Association for Accessible Medicines. In 2020, 72 first generics were approved. They typically enter the market at a discount between 40% to 60%.

On average, of the first generics launched in 2020, only 21% are covered by plan formularies in Medicare Part D plans. When first generics were covered, they were placed on non-generic tiers 79% of the time. In comparison, an average of 66% of commercial plans are covering first generics launched in 2020. Of those plans that cover first generics, 98% place them on generic tiers.

“There are structural elements of the Medicare drug program that unintentionally are causing plans to devalue or undervalue generics in the Medicare program compared to how they value them in commercial health care settings,” Craig Burton, vice president of policy at Association for Accessible Medicines, said in an interview with Formulary Watch®. “This means that seniors in Medicare are facing delayed access to lower costs drugs. As a result, it means they are paying more. It means their out-of-pocket costs are higher because the out-of-pocket cost is based on the list price. And when the only drug that is covered is the brand, their co-insurance is going to be higher.”

Burton noted the use of generics instead of branded products means lower costs overall and lower costs for seniors. He cited a 2019 report by the FDA, which found greater competition among generic drug makers is associated with lower generic prices.

Additionally, branded dispensing incurred an incremental annual cost of $1.67 billion to the Medicare program and $270 million to patients when compared with switching to generics, according to a study published in March 2021 in JAMA Network Open.

This study examined data from January 2020 through October 2020. Among 169 million claims for 224 multisource drugs, 8.3 million claims (4.9%) were dispensed with a branded product. If all branded dispensing requested by prescribers had been substituted by the corresponding generics, the projected savings to the Medicare Part D program would have been $997 million (56.0%) and to Medicare patients $161 million (64.4%).