On the tiering issue for generics, answering the question: “Why are your Part D patients paying higher co-pays for low-cost generics?”

Dan Leonard

The availability of generic drugs has long meant safe, effective and affordable access to medicines for America’s patients. Generics are an integral component of patient care, offering quality, lower-cost versions of prescription drugs approved by the Food and Drug Administration as identical in efficacy and safety to the brand version. In 2019, U.S. savings from generic drugs added up to $313 billion — more than $2.2 trillion in the last decade. Pharmacists are leaders in ensuring patients trust that they can rely on generic drugs.

But recent shifts within the Medicare Part D prescription drug benefit have eroded seniors’ access to the savings provided by lower-cost generic drugs. First, many Part D plans are moving generic drugs off generic formulary tiers with low co-pays and onto brand tiers with higher co-pays. This means that a patient stabilized on a generic medicine at an affordable co-pay may suddenly see their cost for that drug increase drastically. Inexplicably, this can occur even when the generic’s actual price has fallen, and it is costing seniors money every day. Brand drug tiers with higher co-pays should be reserved for brand drugs with high costs, but Part D plans have increasingly placed generics on brand drug tiers. In fact, between 2011 and 2015, plan decisions to place generics on brand drug tiers cost seniors an extra $6.2 billion at the pharmacy counter. But over the same period, the price of those generics barely budged. This trend has only gotten worse — today in Medicare Part D, there are more generic drugs on brand tiers than on low-cost generic tiers. Addressing this simple issue alone could save seniors more than $4 billion yearly in lower out-of-pocket costs.

Unfortunately, these challenges also extend to new generics. These “first” generics are approved by FDA as the first generic competition, often to high-priced brand monopoly drugs. In 2020, 72 first generics were approved, providing access to lower-cost therapies that treat a wide range of medical conditions where little or no competition previously existed. They typically enter the market at a discount between 40% and 60%, offering important savings for patients. But, increasingly, Medicare plans are delaying coverage of these cost-saving options.

While most commercial plans automatically cover a first generic on a generic tier immediately after it enters the market to take advantage of the substantial savings for both plan sponsors and patients, the Part D formulary guidelines operate differently. In most cases, it takes three years before first generics are covered on just half of Part D formularies. This means that the 46 million of America’s seniors covered by Part D programs are not receiving the full value of either their program benefits or the safe, effective, lower-cost generic.

Fortunately, there are steps policy makers can take to address the perverse incentives at work in Part D and expand seniors’ access to lower-cost generic medicines. In Congress, the Ensuring Access to Lower-Cost Medicines for Seniors Act (H.R. 2846) would make sure that America’s seniors receiving drug coverage through the Medicare Part D program are able to access and fully benefit from low-cost generics and biosimilars. It would help restore the original intent of the Medicare Part D program to increase patient access to low-cost medicines and reduce seniors’ out-of-pocket costs for prescriptions by ensuring these plans cover new generic drugs, particularly first generics, when they launch. This ensures Part D beneficiaries can immediately benefit from the introduction of a generic competitor to the marketplace. It would also ensure that generic drugs are placed on generic tiers, separate from higher-priced brand drugs. H.R. 2846 would complement ongoing discussions on modernizing the Medicare drug benefit through changes that would encourage health plans to prioritize the use of lower-cost generics and biosimilars.

Polls consistently show that America’s voters want policy makers to act to reduce the cost of prescription drugs, and these bipartisan solutions represent an opportunity to address that challenge — meaningfully reducing out-of-pocket costs for Part D patients and generating significant savings for the Medicare program and taxpayers.

Dan Leonard is president and chief executive officer of the Association for Accessible Medicines.