Medicare Out-of-Pocket Costs Higher For Generic Drugs Vs Brand-Name
Some Medicare beneficiaries pay more out-of-pocket for some of their generic drugs than for brand-name due in part to Bipartisan Budget Act, study shows.
Source: Getty
A recent Health Affairs study found that some Medicare beneficiaries would pay higher out-of-pocket costs for generic drugs than for specialty or brand-name drugs.
Researchers from Vanderbilt University Medical Center and the University of North Carolina at Chapel Hill found that beneficiaries who have reached the coverage gap and who are using brand-name drugs must spend $982 more to get to the catastrophic phase in 2019.
Beneficiaries using generic drugs must spend $3,730 to reach the catastrophic phase.
"Ironically, even if we assume that generic drugs have lower list prices than brands, for Medicare beneficiaries with $20,000 to $80,000 in annual drug spending, using only brand-name drugs could actually save them money," Stacie Dusetzina, PhD, associate professor of Health Policy and Ingram Associate Professor of Cancer Research at VUMC, the study's lead author, said in a press release. Medicare beneficiaries are spending more on generic drugs because of the Bipartisan Budget Act of 2018 (BBA). While the BBA successfully lowered patients’ biosimilar expenditures, it created higher discounts for brand-name drugs without setting competitive pricing for generics.
Median point-of-sale prices were consistently higher for a standard fill for brand-name drugs than for generics and biosimilars, with on average 38.1 percent lower pricing than the brand-name drug price across all products.
Under the current Bipartisan Budget Act of 2018, a discount of at least 65 percent for non-biosimilar generic drugs would secure generics as the most affordable option, making patients pay less out of pocket than they would for brand-name drugs.
The article’s authors noted three primary reasons for concern.
First, offering discounts for brand-name specialty drugs may decrease the market share for generics or deter new generics from entering the market. This would challenge attempts at reducing generic costs, particularly since very little marketing goes toward generics—specifically, those administered for rare diseases.
Second, plans do not always offer both the generic and brand-name versions of a drug. This could limit patients’ ability to opt for a generic with lower out-of-pocket cost.
Lastly, states with generic substitution laws might inhibit patients from receiving their prescribed brand-name drug. These laws require providers to write “dispense as written” on the prescription in order for the drug to be given to the patient. However, the authors argue that rather than promoting doctors to write the phrase, policymakers should push generic drug use instead in order to lower spending.
Several factors govern whether a pharmacist can substitute a generic for a brand-name drug, explained a recent study conducted by The National Conference of State Legislatures (NCSL) on generic substitution. the factors include the price difference between the two drugs, the physician’s opinion on whether a substitution is viable, the patient’s consent, and if the FDA determines the to be bioequivalent, meaning its active ingredients, dosage, route of administration, and strength are identical.
In order for a physician to prohibit a substitution, he must write “no substitution should be made,” “do not interchange,” or “dispense as written/D.A.W.”
States vary on which of these requirements are necessary for a substitution to be made, most agreeing on price equivalency and patient consent or at least notification. All states agree that the prescriber has the authority to block a pharmacist from making a substitution.
“Many policymakers recognize the potential for large cost savings by encouraging patients to use generic drugs,” the NCSL report concluded. “Although there is debate over how to approach this, state lawmakers agree that patients, alongside their health care providers, should be active in deciding what kind of drugs they are being prescribed and dispensed. As we continue to see newer, brand-name prescription drugs increasing in price, generic drug substitution might provide some needed relief both to state budgets and consumers.”
Researchers agreed, suggesting two policy reforms to help beneficiaries pay less for cheaper, generic drugs.
First, the authors support the White House’s recent alterations to the healthcare blueprint, which adjusts the coverage gap discount on brand-name drugs, places a cap on out-of-pocket spending, and revises the catastrophic coverage phase benefit for which plans must cover a higher percentage of drug costs. But they caution that while these proposals would provide relief for extremely high-cost patients, the out-of-pocket cap would take away virtually any price pressure.
The researchers also suggest that the discount applied to brand-name drugs and biosimilars could be applied to generics as well. This presents a challenge, however, regarding funding because if the funding comes from the prices set by the generic drug companies, then the companies might increase prices. But if the discount is applied comes from prices set by payers, then the drugs may be excluded from health plans.
