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Medicare Beneficiaries’ Out-of-Pocket Costs for Commonly Used Generic Drugs, 2009-2017
Patrick Liu, AB; Sanket S. Dhruva, MD, MHS; Nilay D. Shah, PhD; and Joseph S. Ross, MD, MHS
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Medicare Beneficiaries’ Out-of-Pocket Costs for Commonly Used Generic Drugs, 2009-2017

Patrick Liu, AB; Sanket S. Dhruva, MD, MHS; Nilay D. Shah, PhD; and Joseph S. Ross, MD, MHS
Out-of-pocket costs required by Medicare prescription drug plans for drugs available through Walmart’s generic drug discount program have decreased from 2009 to 2017.
ABSTRACT

Objectives: To examine differences in the out-of-pocket costs for common generic drugs used to treat chronic conditions when individuals used their Medicare prescription drug plan (PDP) or when purchased through Walmart’s generic drug discount programs (GDDPs) from 2009 to 2017.

Study Design: A retrospective analysis of Medicare PDP Formulary files and Walmart’s GDDP retail drug lists from 2009 to 2017.

Methods: We identified all generic drugs used to treat chronic conditions that were on Walmart’s GDDP retail drug list from 2009 to 2017. We then determined the out-of-pocket costs for each drug for each Medicare PDP and compared those costs with Walmart’s GDDP cash price.

Results: There were 62 and 43 generic medications used to treat common chronic diseases available through Walmart’s GDDP in 2009 and 2017, respectively. Across all PDPs, the median beneficiary out-of-pocket expenditure for a 30-day supply of the GDDP-available medications for chronic diseases decreased from $5.70 (interquartile range [IQR], $2.55-$7.98) in 2009 to $2.00 (IQR, $0.00-$4.00) in 2017 (P <.001) Approximately three-fifths (60.2%) of PDPs required beneficiaries to pay out-of-pocket costs higher than those of Walmart’s GDDP in 2009, but only one-third (33.4%) did so in 2017.

Conclusions: Although Medicare beneficiary out-of-pocket costs for commonly used generic drug prescriptions generally decreased over time, Medicare beneficiaries may still be paying more for the same drugs than they would through Walmart’s GDDP. Increased generic drug price transparency, including enforcing bans on gag clauses, is needed to ensure that Medicare beneficiaries obtain drugs using the most affordable options.

Am J Manag Care. 2020;26(3):112-117. https://doi.org/10.37765/ajmc.2020.42635
Takeaway Points

Retail generic drug discount programs (GDDPs) improve the affordability of generic medications, especially for individuals without pharmaceutical coverage. We characterized trends in the out-of-pocket costs required by Medicare prescription drug plans for generic drugs used for chronic diseases and compared them with the cash price of the drugs in Walmart’s GDDP from 2009 to 2017.
  • Out-of-pocket costs for these generic drugs have decreased over time.
  • Formularies have increasingly classified these drugs into tiers other than preferred generic tiers.
  • Opportunities to lower out-of-pocket costs still exist, as a substantial proportion of plans still require costs higher than GDDP cash prices for the same medications.
The 2003 Medicare Modernization Act established the Medicare Part D prescription drug benefit to improve access to and affordability of prescription medications for beneficiaries through government subsidies.1 Under the benefit, private plans negotiate with drug manufacturers and compete to enroll Medicare beneficiaries. To control prescription costs, Part D plans steer consumers toward certain drugs through coverage decisions, tier structure (which determines co-payments or coinsurance), and utilization management tools. Since its inception, Part D has grown from offering prescription drug coverage to 27.9 million beneficiaries in 2006 to 43.9 million in 2018,2,3 and it achieved comparable levels of utilization of generic drugs by enrollees in state Medicaid programs.4 However, billions of dollars in savings could be realized through greater generic substitution of brand-name medications among Medicare beneficiaries.5-7

In 2006, the same year that the Part D benefit went into effect, large wholesale pharmacy chains, such as Walmart, began creating generic drug discount programs (GDDPs). These programs offer common generic medications for low out-of-pocket costs, usually $4 for a 30-day supply and $10 for a 90-day supply. This price can sometimes be lower than what patients would pay through their insurance coverage when purchasing the same medications and, therefore, leads to lower out-of-pocket costs. In 2007, 80% of beneficiaries filled prescriptions for generic medications available through GDDPs, but only 16.3% of those used the $4 GDDP8; the estimated total savings if beneficiaries had used GDDPs instead of their insurance was more than $5.7 billion, demonstrating the significant impact that GDDP utilization could have on prescription medication costs.9 A recent study of 2017 Medicare prescription drug plan (PDP) coverage of generic drugs used to treat cardiovascular disease (CVD) similarly demonstrated potential savings through GDDPs: 21% of PDPs required beneficiary out-of-pocket payments higher than Walmart’s GDDP cash price for a 30-day supply of the same drug.10 However, whether the proportion of PDPs with higher prices than those offered by GDDPs varies across geography, across other medication classes, or over time remains unknown. Accordingly, we used Medicare PDP data to characterize trends in Medicare beneficiary out-of-pocket expenditures for commonly used generic medications that treat any chronic disease and were available through Walmart’s GDDP from 2009 to 2017. We expect our findings to offer important insights for future policy efforts intended to further reduce costs for Medicare beneficiaries and to better clarify the role that GDDPs are likely to play in insurance cost sharing and formulary structure.

METHODS

Data Sources
​​​​​​

We used data from the second quarters of 2009 through 2017 CMS PDP Formulary and Pricing files. These files provide information submitted by each Part D plan, including the associated formulary, tier assignment for all covered medications, co-payment type (eg, dollar co-payment vs percentage coinsurance), and co-payment amount. Because comprehensive Medicare PDP data to calculate out-of-pocket costs were not available until 2009 for 30-day supplies and 2014 for 90-day supplies, we limited our analysis to annual data from 2009 to 2017. We excluded Special Needs Plans, plans with incomplete or inaccurate data, and plans that operated in states for which Walmart did not guarantee its advertised cash price (generally $4 for a 30-day supply and $10 for a 90-day supply) for all of its GDDP medications through the entire time period of the analysis. Furthermore, we noted whether each plan was a Medicare Advantage (MA) plan, which covers Part A and Part B benefits in addition to prescription drug coverage, or a stand-alone Part D plan, which covers only prescription drugs.

Drug Sample

We obtained information on drugs offered through Walmart’s GDDP from 2009 to 2017 directly from Walmart’s pharmacy website.11 We included all oral generic prescription medications used to treat chronic conditions that were not available over the counter. Because drugs could be added or removed from GDDP lists at any time, the drug sample varied from year to year.

Main Outcome Measures

Our primary outcome measure was the beneficiary out-of-pocket expenditure for generic prescription drugs for chronic conditions that were available through Walmart’s GDDP from 2009 to 2017. When calculating the median out-of-pocket expenditures, we adjusted for inflation using June 2017 as the index month and year,12 and we estimated the costs incurred by the beneficiary when filling a prescription with coverage for the first time in the year.

As a secondary outcome, we determined the proportion of plans requiring costs greater than Walmart’s GDDP price. For this outcome, we did not adjust for inflation because the GDDP cash price has remained the same since the inception of Walmart’s GDDP. Although nearly all included medications were offered by Walmart’s GDDP at $4 for a 30-day supply and $10 for a 90-day supply, for alendronate sodium, finasteride, and tamoxifen citrate, the 30-day supply cash price was $9 and the 90-day supply cash price was $24.


 
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