Patient and Payer Incentives to Use Patented Brand-Name Drugs vs Authorized Generic Drugs in Medicare Part D

This cross-sectional study of Medicare Prescription Drug Plan Formulary and Pricing Information Files and Medicare Part D plan enrollment assessed examined coverage for 4 brand-name insulin drugs and direct-acting antiviral agents and their authorized generic formulations. Questions Are authorized generic versions of insulin and direct-acting antiviral agents for hepatitis C covered by Medicare Part D plans, and do they provide value for patients, plans, and the Medicare program compared with the brand-name drug? Findings This cross-sectional study of Medicare formulary and pricing data for quarter 3 of 2020 found that most Part D plans offered brand-name drug-only or both brand-name and authorized generic drug coverage. Although Medicare beneficiaries who filled insulin and direct-acting antiviral prescriptions would spend less out of pocket with authorized generic drug use, plans and Medicare would likely spend more on these authorized generic drugs than brand-name drugs for beneficiaries with total drug spending below Medicare's catastrophic threshold. Meaning This study suggests that authorized generic drugs available before patent expiration may lower patient spending but are unlikely to provide savings for Part D plans or Medicare, giving them little incentive to offer authorized generic drugs over brand-name drugs. Importance In response to scrutiny over high drug prices, manufacturers of insulin and direct-acting antiviral agents for treating hepatitis C have recently introduced authorized generic alternatives to their patented brand-name products. These authorized generic drugs have list prices at least 50% lower than the list price of the brand-name drugs, which should result in savings to patients. However, it is unclear whether these authorized generic drugs are offered on Medicare Part D formularies because they may not provide savings to plans or Medicare. Objective To assess Medicare Part D formulary coverage for 4 brand-name formulations of insulin and direct-acting antiviral agents and their authorized generic formulations. Design, Setting, and Participants This cross-sectional study used Medicare Prescription Drug Plan Formulary and Pricing Information Files from quarter 3 of 2020 and Medicare Part D plan enrollment for September 2020. Four patented brand-name drugs (sofosbuvir and velpatasvir fixed-dose combination tablets [Epclusa], ledipasvir and sofosbuvir tablets [Harvoni], insulin lispro [Humalog], and insulin aspart [Novolog]) and their authorized generic formulations for all Part D stand-alone prescription drug plans (n = 959) and Medicare Advantage prescription drug plans (n = 3148) were studied. Main Outcomes and Measures Beneficiary-weighted formulary coverage of brand-name and authorized generic products; beneficiary out-of-pocket costs; and prerebate plan, manufacturer, and Medicare spending on brand-name and authorized generic products. Results In quarter 3 of 2020, 97% of beneficiaries were in plans that covered brand-name drugs only or both brand-name and authorized generic drugs; approximately 3% were in plans that covered authorized generic drugs only. Observed authorized generic drug list prices were 67%, 62%, and 50% lower than list prices for Epclusa, Harvoni, and each brand-name insulin product, respectively. Medicare beneficiaries using authorized generic drugs could save $270 per year for 12 vials of Humalog and $2974 for a full course of Harvoni. Plans, however, have limited incentives to encourage authorized generic drug use because rebates for brands likely exceed savings available with authorized generic drugs, particularly for beneficiaries with spending that reaches the Medicare Part D coverage gap. Conclusions and Relevance The results of this cross-sectional study suggest that authorized generic drugs for insulin and direct-acting antiviral agents may lower out-of-pocket spending for patients but are unlikely to provide savings for Part D plans or Medicare. Instead, these drugs allow manufacturers to offer products at a lower list price without materially lowering net prices or profits.