Impacts of Generic Competition and Benefit Management Practices on Spending for Prescription Drugs: Evidence from Medicare’s Part D Benefit

Abstract

Objective: This study estimates the effects of generic competition, increased cost-sharing, and benefit practices on utilization and spending for prescription drugs. classes with practically no generic competition. All variables were constructed to measure each drug relative to its class at a specific plan sponsor. Data and Methods: Results:We estimated that the shift toward generic utilization had cut in half the rate of increase in the price of a prescription during [2007][2008][2009]. Specifically, the results showed that (1) rapid generic penetration had significantly held down costs per prescription, (2) copayment and other benefit practices shifted utilization to generics and favored brands, and (3) price increases were generally greater in less competitive classes of drugs. Conclusion: In many ways, Part D wasimplemented at a fortuitous time; since 2006, there have been relatively few new blockbuster drugs introduced, and many existing high-volume drugs used by beneficiaries were in therapeutic classes with multiple brands and generic alternatives. Under these conditions, our paper showed that plan sponsors have been able to contain costs by encouraging use of generics or drugs offering greater value within therapeutic classes. It is less clear what will happen to future Part D costs if a number of new and effective drugs for beneficiaries enter the market with no real competitors.

Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks

“…In the US, the government does not control reimbursement,[ 16 ; 33 ; 91 ] based on the assumption that the free market will drive the pharmaceutical industry to compete, which will result in lower prices. [ 92 ; 103 – 105 ] Thus, pharmaceutical companies set their own prices, which allows for market calculations aimed at maximizing profits. [ 106 – 108 ] As a consequence, US prescription drug prices are among the highest in the world.…”

“…[ 127 ] For these drugs, the preference policy implies that new patients start on a generic drug, but those who have already reacted well to a branded version do not have to switch. The potential substitution rate differs per indication group[ 103 ; 127 ; 129 ; 130 ].…”

“…[ 66 ; 67 ] The effect cannot be compensated for by new drug introductions, since relatively few new blockbuster drugs have been introduced. [ 103 ] This means that in order to maintain profitability, more revenue must be generated from fewer breakthrough drugs, which has led to increased prices for innovator drugs and increased merger and acquisition activity within the pharma industry. Over the last two decades, 60 pharma companies have merged into just ten pharma companies.…”

Patient-reported financial barriers to adherence to treatment in neurology

“…We would expect that the patients with cost-related nonadherence would have been most often prescribed medications in the highest cost tier, as described in previous studies 62. However, we were not able to examine if nonadherence was related to drug tier and co-pay as we did not have reliable access to each patient’s pharmacy benefit to determine these interactions.…”

Policy and ethical considerations for widespread utilization of generic orthopedic implants

“…Although generic drugs have been used for decades in the pharmaceutical industry, the use of generic implants has only recently been considered in the field of orthopedic surgery [8] , [9] , [10] . In the pharmaceutical sector, an estimated $33 billion has been saved by Medicare in the United States through utilization of generic medications [11] . There could be potential for an analogous substantial reduction in healthcare expenditures via the use of generic orthopedic implants.…”