Analysis of Part D Formularies Finds Favored Treatment for Brands Over Generics

Branded drug products have fewer potential cost-saving limits on them in Medicare Part D formularies, researchers at John Hopkins University have found.

The results were published Monday in JAMA Internal Medicine. Writing in a research letter, the authors noted that even when generics are available, brands may still receive favorable placement on a formulary, typically through rebates and other price breaks. The cost of drugs in Medicare has been a focus of the Trump administration, which is seeking to halt such rebates in taxpayer-funded plans.

The researchers examined the 57 unique drug formularies offered across all 750 Medicare Part D stand-alone prescription drug plans in 2016 to see how often branded products were given more favorable formulary placement than generic products.

They defined favorable placement as the placement of a branded product in a lower cost-sharing tier or the presence of fewer utilization controls such as prior authorization, step therapy, or quantity limits than its corresponding generic.

The study looked at multisource drugs, meaning drugs for which both versions were available, and examined the lowest strength per drug when multiple strengths were available. Drug prices were compared by dividing the mean cost per unit of the branded products by the mean cost per unit of the corresponding generic drugs in 2016 Medicare Part D claims data.

The 57 formularies covered, on average, 1657 different drugs, of which 935 were multisource. Results showed the following:

• A total of 120 multisource drugs, or 12.8%, did not have generic products covered in any formulary.
• A total of 41 of the 57 formularies, or 72%, placed at least 1 branded product in a lower cost-sharing tier than its generic counterpart.
• All formularies had at least 1 multisource drug covered without a generic product. Seventeen of the 57 formularies, or 30%, adopted fewer utilization controls on the branded product for at least 1 drug.

The researchers also examined 222 multisource drugs that were covered in all formularies and had branded and generic products covered in at least 1 formulary. Differences were seen here as well:

• Eleven drugs, or 5%, had branded products more frequently placed in a lower cost-sharing tier than the corresponding generics.
• A higher percentage—about 30%—had less frequent utilization controls imposed on branded products than on generic products.
• The price of the branded product was a median of 3.9 times higher than that of the generic product (interquartile range, 1.7-12.5). In other words, for a generic drug priced at $1, the median price of the brand version was $3.90.

Drug price often determines beneficiaries’ cost sharing, the authors noted, and favorable formulary placement of branded drugs encourages the use of more expensive products and can lead to higher out-of-pocket costs for Medicare beneficiaries as well as higher expenditures for the Part D program.

Besides enacting the HHS proposal to remove the “safe-harbor” provision that allows drug manufacturer rebates to be paid without triggering the federal anti-kickback statute, another option is to prohibit branded drugs from obtaining favorable placement on Medicare formularies.

However, the authors noted that it is still possible for pharmaceutical makers to restructure payments to drug plans to avoid this restriction.

In their letter, the authors noted that their analysis may have overestimated the difference in price between branded and generic products because of the confidentiality of price concessions.

Reference

Socal MP, Bai G, Anderson GF. Favorable formulary placement of branded drugs in Medicare prescription drug plans when generics are available [published online March 18, 2019]. JAMA Intern Med. doi:10.1001/jamainternmed.2018.7824.