Trends in Medicare Part D Coverage of Generics With Equivalent Brand-Name Drugs

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The American Journal of Managed Care, July 2021, Volume 27, Issue 7

High-tier generic drug placement in Medicare Part D has increased over time, but it may be related to a drug’s clinical profile and availability of substitutes rather than preferred brand-name drug coverage.


Objectives: To evaluate whether increased placement of generic drugs on higher cost-sharing tiers in Medicare Part D is associated with coverage of multisource brand-name drugs, plan type, or product characteristics.

Study Design: Descriptive study of Medicare Prescription Drug Formulary Files.

Methods: We analyzed plan coverage and tiering of brand-name drugs and matched generics from 2013-2019. We compared tiering changes and estimated out-of-pocket spending by tier for all Part D plans and by plan type (Medicare Advantage prescription drug [MA-PD] vs stand-alone prescription drug plan [PDP]) for covered generic drugs. Finally, we identified the generic products commonly placed on higher tiers in 2019 and categorized them based on clinical characteristics.

Results: Across 5,220,488 plan-product combinations in 2019, 76.4% of generic drug observations reflected coverage on Part D plan formularies, compared with only 12.1% of brand-name drugs. Between 2013 and 2019, the share of observations reflecting covered generics on lower tiers decreased from 76.8% to 53.9%, whereas the share on higher tiers increased from 7.5% to 28.0%. MA-PD plans were more likely than PDPs to place generic drugs on lower tiers, even among plan sponsors offering both plan types. Despite these trends, higher tier placement does not appear to be related to more generous coverage of brand-name products. Instead, in 2019, 70% of high-tier generics had multiple formulations, required heightened clinical monitoring, or had head-to-head treatment options available.

Conclusions: Although Part D plans have increasingly placed covered generic drugs on higher formulary tiers over time, this may be partly explained by a drug’s clinical profile and availability of substitutes rather than preferred brand-name drug coverage.

Am J Manag Care. 2021;27(7):283-288.


Takeaway Points

Prior work has shown increased high-tier placement for generic drugs in Medicare Part D but has not examined trends in corresponding brand-name drug coverage or characteristics of generics placed on high tiers. We find that:

  • The share of observations reflecting covered generics on higher tiers nearly quadrupled from 2013 to 2019, while brand-name drug coverage declined.
  • Lower-tier generic placement was more common in Medicare Advantage prescription drug plans than in stand-alone prescription drug plans.
  • Higher-tier generic placement does not appear to be related to more generous coverage of brand-name drugs but may reflect a drug’s clinical profile and availability of substitutes.


Formulary placement has a major impact on how much patients pay out of pocket for medications. Most Medicare Part D drug plans, including stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug (MA-PDs) plans, use a 5-tier formulary, generally placing generic drugs on the tier with the lowest beneficiary cost sharing (tier 1), and “preferred” drugs on lower tiers than “nonpreferred” drugs, with cost-sharing amounts increasing by tier. This formulary design reflects a long-standing push to increase utilization of generics instead of their brand-name equivalents to achieve savings for patients and payers alike.1 Because of these efforts, generic dispensing in Part D increased from 61% in 2007 to nearly 90% in 2019.2-4

Although most Part D formularies encourage the use of generics instead of branded drugs,5 recent studies have highlighted increased placement of generics on higher cost-sharing tiers.6-8 The shift of generics to higher tiers does not appear to coincide with increases in generic drug prices; on the contrary, research shows substantial generic drug price declines in recent years.9,10 The shift does coincide with increases in negotiated rebates for brand-name drugs.11 Because rebates are used to secure formulary inclusion and placement on preferred tiers, plans may be incentivized to shift some generics to higher cost-sharing tiers when equivalent brands have high negotiated rebates. Although brand-name drug rebates help to lower Part D plan and Medicare program costs, translating to lower plan premiums, they may increase patient out-of-pocket drug costs, particularly under deductibles and coinsurance arrangements.12

To understand whether placement of generics on higher Part D plan tiers over time is cause for concern, 3 key unanswered questions must be addressed. First, how has coverage changed over time for branded products with generic competition? If rebates are driving plan placement of generics into higher tiers, we would expect that branded drugs with generic competition would remain on formulary and with favorable tier placement over the study period. Second, do shifts over time in formulary coverage of generics differ for MA-PD plans and PDPs? Specifically, findings of prior studies suggest that MA-PD plans may strategically use formulary design to attract more profitable enrollees and to incentivize adherence among enrollees with conditions with high medical cost-related offsets.13-16 Third, which generic drugs with marketed branded equivalents are being placed on higher tiers in 2019? A shift of select generics to higher tiers either in classes with a greater number of treatment choices or when multiple formulations of the product are also available and covered on lower tiers would be less concerning than if generic products without alternatives are placed on higher tiers. Our analysis addresses these gaps in existing research related to generic and brand-name drug placement on Medicare Part D plan formularies.


Data Source and Product Selection

We used Medicare Prescription Drug Plan Formulary, Pharmacy Network, and Pricing Information Files to evaluate Part D formulary coverage and tier placement for matched brands and generics available within each calendar year from 2013 to 2019. Unlike administrative claims data that provide information on products filled and out-of-pocket costs paid, the formulary files provide details of the benefit design for each product covered by each Medicare Part D plan, regardless of whether the product was used by a beneficiary, including costs charged by plans for a monthly fill. We used the CMS formulary reference file from the third quarter of each year to define candidate drugs for each subsequent plan year. Generic drugs were defined as nonbranded therapeutic equivalent products approved through an Abbreviated New Drug Application and were identified in our data as products without a trade name.17 Using these candidate drug lists, we identified exact brand-generic pairs based at the active ingredient, strength, and dose form level within each calendar year, allowing for generic entry and brand-name drug exit from the market over time. To be included in the analysis, the brand-name and generic product had to be covered on at least 1 Part D formulary in the year—but not necessarily the same plan—indicating that both products were available in the year. Our analysis included 1106 matched brand-generic pairs and 2816 unique Part D plans in 2013, and 1414 matched brand-generic pairs and 3692 unique Part D plans in 2019.

Key Measures

Product coverage and tiering. For each plan and year, brands and generics were separately categorized as covered or not and, if covered, tier placement was identified. Because tier numbers may not represent the same concept across all plans (eg, tier 2 could include generics only in a plan with 2 generic tiers but preferred brands in another plan that has only 1 generic tier), we identified the specific tier labels associated with each formulary tier number for each plan, then renumbered tiers following the most common 5-tier system in recent years: preferred generic, generic, preferred brand, nonpreferred drug, specialty tier (see eAppendix [available at] for further details). We excluded special needs plans (n = 642 and 733 in 2013 and 2019, respectively) and plans with formularies that did not have separate tiers (n = 132 and 46 in 2013 and 2019, respectively).

Expected out-of-pocket costs. Formulary data from the last quarter of the calendar year include the median point-of-sale price per 30-day fill for each drug during the prior quarter and the Part D benefit design for the current quarter. We calculated expected out-of-pocket costs during the initial Part D coverage phase (after any relevant deductible is met) for each product-plan combination using the per-fill flat co-payment or the required coinsurance multiplied by the median point-of-sale price for that product and plan.


We summarized plan coverage and tiering of brand-name drugs and matched generics across all Part D plans in 2013 and 2019. We constructed a measure based on the product of brand-name–generic pairs and Part D plans available in each year to summarize formulary coverage patterns for brand-name and generic drugs across plans. We refer to this measure as the “plan-product combination,” where each observation represents the coverage status of one product for one plan. This measure allowed us to capture the universe of formulary coverage decisions for all products in our analysis, accounting for the fact that some products will be covered by some plans and not others. We also compared tiering changes and estimated mean and median out-of-pocket spending by tier for all Part D plans and by plan type (MA-PD vs PDP) for covered generic drugs, weighting by plan enrollment. We present median out-of-pocket spending below and mean spending in the eAppendix. We use absolute standardized differences (ASDs) to compare tier coverage and placement by plan type and year, which enables identification of statistically relevant differences in settings where the sample size is very large. As is customary, we use an ASD greater than 10% to identify group differences.

Because Part D enrollment is highly concentrated within several large plan sponsors, we compared coverage and tiering among the top 5 largest Part D plan sponsors relative to smaller plan sponsors, separately for MA-PD plans and PDPs. We compare differences across the top plan sponsors in each market, and within companies offering both plan types, hypothesizing that differences by plan type within plan sponsors would best reflect strategic formulary decisions and the different incentives for tier placement among PDP and MA-PD plan offerings.13 Finally, we identified the generic products commonly placed on higher tiers in 2019 (median placement on tier 4 or 5 across all plans) and categorized them as drugs with multiple formulations; narrow therapeutic index drugs or those with safety concerns; anti-infectives; or drugs with head-to-head treatment options available. We hypothesized that placement of such products on high tiers may reflect the availability of lower-tier treatment options. This resulted in 3,114,496 plan-product combinations in 2013 (1106 matched brand-generic pairs and 2816 Part D plans) and 5,220,488 plan-product combinations in 2019 (1414 matched brand-generic pairs and 3692 Part D plans).


Coverage and Tiering for All Matched Brand-Generic Pairs

In both 2013 and 2019, generic products were far more likely to be covered than their matched branded counterparts in the same year. In 2019, based on our measure of plan-product combinations, roughly three-fourths (76.4%) of the generic drug observations in our analysis reflected coverage on Part D plan formularies, compared with only 12.1% of observations for branded drugs (Figure 1).

Between 2013 and 2019, a nonsignificant increase occurred in the proportion of plan-product observations representing generics not covered on Part D plan formularies from 21.4% to 23.6% (ASD, 5.3%). Over the same period, the proportion of observations corresponding to brands not covered increased from 74.7% to 87.9% (ASD, 34.1%).

Tier Placement of Covered Generics Among All Part D Plans

We observe a decrease between 2013 and 2019 in the likelihood that generics were covered on the lower cost-sharing tiers (tiers 1 and 2) and an increase in the likelihood that generics were covered on the highest cost-sharing tiers (tiers 4 and 5) (ASD > 10% for all). Placement of covered generics on tiers 1 and 2 decreased more than 20% between 2013 and 2019, from 76.8% to 53.9%, whereas placement of covered generics on tiers 4 and 5 increased by a similar magnitude, from 7.5% to 28.0% (Figure 2).

Tier Placement of Covered Generics by Plan Type

Stratifying by plan type, we observed similar tier placement for covered generics in both MA-PD plans and PDPs in 2013. In 2013, 77.7% of the MA-PD plan observations represented covered generics placed on the lowest cost-sharing tiers (tiers 1 or 2), compared with 69.8% for PDP observations (ASD, 18.2%). The likelihood of covered generics being placed on higher cost-sharing tiers (tier 4 or 5) in 2013 was slightly higher among PDP observations than MA-PD plan observations (11.0% vs 7.0%; ASD, 14.0%).

In 2019, formulary placement of generics on lower cost-sharing tiers was less common than in 2013 in both MA-PD plans and PDPs, particularly among PDPs. For PDPs, the share of observations representing covered generics on tiers 1 or 2 was 40.0% in 2019 vs 55.3% among MA-PD plans (ASD, 49.5%). Conversely, in 2019, the likelihood of covered generics being placed on higher cost-sharing tiers was much greater in PDPs than in MA-PD plans. In 2019, 36.5% of observations for PDPs represented generics on tiers 4 or 5, whereas 27.2% of observations for MA-PD plans represented generics on those tiers in that year (ASD, 55.8%).

Estimated Median Out-of-Pocket Spending for Covered Generics by Tier

Estimated median out-of-pocket costs increased for generic drugs placed on each tier between 2013 and 2019. However, estimated median out-of-pocket costs by tier varied less among MA-PD plans than among PDPs (Figure 3). Median out-of-pocket costs in MA-PD plans were $2 and $343 for the lowest and highest cost-sharing tiers (tier 1 and tier 5), respectively, in 2019, vs $1 and $448 in PDPs. In PDPs, estimated out-of-pocket costs for drugs in tiers 1, 2, and 3 decreased over time, but estimated out-of-pocket costs for tier 4 products increased from a low of approximately $100/fill in 2015 to $277/fill in 2019. This reflects increasing use of coinsurance for tiers 3 and 4 by PDPs vs flat co-payments in MA-PD plans over the study periods. PDPs also had higher estimated median out-of-pocket costs for tier 5 generics over the study period relative to MA-PD plans.

Generic Tier Placement Among Plans Offered by the Top Part D Sponsors in 2019

We find greater similarity in formulary coverage and tier placement of generics among the top 5 PDP sponsors than among the top 5 MA-PD plan sponsors. For plans offered by the top 5 PDP sponsors, placement of generics on tier 1 or 2 ranged from 22.5% to 32.2% and placement on tier 4 or 5 ranged from 20.5% to 32.2% (Figure 4).

Generic drug tier coverage and placement varied widely across the top 5 MA-PD plan sponsors. Four of the top 5 MA-PD plan sponsors (all except Kaiser) placed about one-third of generic drugs on tiers 1 and 2. All other MA-PD plan sponsors covered a larger share of generics and put more generics on a lower tier than the larger MA-PD plans (excluding Kaiser) (Figure 4).

For firms offering both PDPs and MA-PD plans, we find some evidence of different formulary coverage strategies used by the same firm (Figure 4). For example, CVS Health covered more generics and placed a larger share of these products in lower cost-sharing tiers in its MA-PD plan offerings than in its PDP offerings: 91.7% of generics were covered and 31.6% were placed on tiers 1 and 2 in CVS Health’s MA-PD plans vs 68.9% covered and 22.5% on tiers 1 and 2 in CVS Health’s PDPs. Similarly, Humana covered slightly more generics and placed more generics in tiers 1 and 2 in its MA-PD plans than in its PDPs.

Characteristics of Covered Generics Placed on Tiers 4 and 5 in 2019

Approximately 36.5% of PDP observations and 27.2% of MA-PD observations reflected covered generics on tiers 4 or 5 in 2019, up from 11.0% and 7.0%, respectively, in 2013 (Figure 2). Among these observations in 2019, we find that nearly 70% fell into 1 or more of the following categories: drugs with multiple formulations (eg, long-acting or extended-release products), drugs with a narrow therapeutic index, anti-infective drugs, and those in clinical categories with head-to-head treatment options available (eg, migraine, overactive bladder, antiemetics) (see eAppendix).


Prior research has documented a shift of generic drugs to higher cost-sharing tiers over time in Medicare Part D plans,6,7 with the implication that this shift impedes access to low-cost generics in favor of branded drugs. Although we also observe greater generic placement on high tiers over time, we find that Part D plans do not cover the brand-name drug more favorably in these instances. In reviewing the generic products commonly placed on tiers 4 and 5 in 2019, we found that many were reformulations of existing generic drugs, drugs that require heightened clinical monitoring because of patient safety concerns (eg, narrow therapeutic index drugs, non–first-line anti-infectives), and products with head-to-head treatment options. Future studies should evaluate the extent to which formularies offer lower-tiered treatment options for beneficiaries when placing generic drugs on a high cost-sharing tier to determine whether higher generic tier placement over time is impeding access to care.

Consistent with prior work,13-16 we find that MA-PD plans and PDPs differ in their coverage of generic drugs, with MA-PD plans overall offering a higher percentage of generics on lower cost-sharing tiers than PDPs, even among plan sponsors that offer both types of plans. In 2019, we observe that PDPs place many covered generic drugs on tier 4 and typically charge coinsurance for this tier. By contrast, in MA-PD plans, a somewhat smaller share of covered generics is placed on tier 4 (the nonpreferred drug tier), and MA-PD plans typically offer these drugs under a flat co-payment. The difference in cost-sharing design may be partially driven by the predominance of enhanced plans among MA-PD plans vs PDPs: In 2019, 95% of MA-PD plans were enhanced vs 61% of PDPs. Enhanced plans are permitted to have a lower share of costs paid by beneficiaries than basic plans,18 meaning enhanced plans are better positioned to place higher-priced generics on lower cost-sharing tiers.

The observed variation in coverage and tier placement of generics in MA-PD plans and PDPs likely reflects the different benefit design incentives facing different plan types. As managed care plans, MA-PD plans are responsible for both drug and nondrug medical spending,19 whereas stand-alone drug plans are liable only for drug spending. Because medication nonadherence can result in increased medical spending for some conditions,20 the increased risk borne by MA-PD plans may incentivize them to provide more generous coverage of generics.13-16

Our findings suggest that some patients may have seen an increase in their out-of-pocket costs for generics associated with the shift from lower to higher cost-sharing tiers over time. The cost implications will vary depending on an enrollee’s plan type (PDP or MA-PD), which specific plan they are enrolled in, the price of the drug, and whether switching to an alternative product on a lower cost-sharing tier is possible. Given coverage changes over time, patients should be encouraged to use the annual open enrollment period to switch plans if their current plan has made formulary changes that negatively affect coverage and costs,21 although research shows that switching is uncommon among Part D enrollees.22 Furthermore, patients and physicians could work together to identify treatments that are clinically appropriate and favorably tiered. Improved resources for comparing plan formularies and out-of-pocket costs could facilitate both actions.23


Our drug selection process matches branded and generic products based on active ingredient, dose, and formulation, which may create redundancy by treating all doses and formulations as individual product pairs. This approach also excludes products with branded counterparts that are no longer on the market, as well as brands without generic equivalents. Second, we examine only formulary placement and do not account for other restrictions on product access such as quantity limits, prior authorization, or step therapy, although prior work has found that these tools are not differentially used for brands and generics in the same pair.5 Third, given the scope of our analysis, we cannot account for the number of generic competitors or therapeutic substitutes available on lower tiers across plans and years. Instead, we identify how often generic drug products placed on high tiers in 2019 (tier 4 or 5) had multiple formulations, were narrow therapeutic index or anti-infective drugs, or had head-to-head treatment options available. Fourth, we focus on out-of-pocket spending in the initial coverage phase of the Part D benefit, which does not reflect cost sharing for the coverage gap (25% coinsurance) and the catastrophic coverage phase (5% coinsurance). Finally, we cannot account for the use of patient assistance programs, which may lower out-of-pocket costs for beneficiaries. However, availability of such funds has been shown to decline with generic drug availability.24


Part D plans have increasingly placed covered generic drugs with brand-name counterparts available on higher formulary tiers over time. Our analysis suggests that higher tier placement of many generics is not associated with more generous coverage of brand-name products and may be partly explained by a drug’s clinical profile. Future work should evaluate whether beneficiaries have access to clinically acceptable treatment alternatives when their plans place a generic on a high cost-sharing tier.

Author Affiliations: Department of Health Policy, Vanderbilt University School of Medicine (SBD, LN), Nashville, TN; Vanderbilt-Ingram Cancer Center (SBD), Nashville, TN; Kaiser Family Foundation (JC, ST, TN), Washington, DC; Departments of Population Health and Anesthesiology, University of Kansas Medical Center (AWR), Kansas City, KS; Health Policy Institute, McCourt School of Public Policy, Georgetown University (JH), Washington, DC.

Source of Funding: Arnold Ventures.

Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (SBD, JC, AWR, JH, TN); acquisition of data (SBD); analysis and interpretation of data (SBD, JC, AWR, JH, ST, LN, TN); drafting of the manuscript (SBD, JC, AWR, ST, LN); critical revision of the manuscript for important intellectual content (JC, AWR, JH, ST, TN); statistical analysis (SBD, LN); obtaining funding (SBD, JC, TN); and administrative, technical, or logistic support (ST).

Address Correspondence to: Stacie B. Dusetzina, PhD, Department of Health Policy, Vanderbilt University School of Medicine, 2525 West End Ave, Ste 1203, Nashville, TN 37203. Email:


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