Projected Out-of-Pocket Savings of the Medicare Part D $2 Drug List Model

Abstract

This study evaluates the amount of out-of-pocket cost savings Medicare Part D beneficiaries would have experienced if a proposed Medicare $2 drug list model had been in place in 2021.

Generic drugs represent 90% of prescription fills and 62% of patient out-of-pocket costs in the US.¹ In February 2023, the secretary of the US Department of Human and Health Services proposed 3 payment and delivery models intended to lower drug costs.² One of them, the Medicare $2 drug list model, proposed limiting beneficiary cost sharing to $2 (for up to a 30-day supply) or $5 (for up to a 90-day supply) for a sample list of 101 generic drugs announced in October 2024.³ We evaluated the amount of out-of-pocket cost savings Medicare Part D beneficiaries would have experienced if the Medicare $2 drug list model had been in place in 2021.

Methods

Using Medicare Part D claims data from 2021 for a 100% sample of Medicare beneficiaries, claims for the 101 generic drugs were identified, as described in the eAppendix and eFigure in Supplement 1. Claims for longer than 90 days of supply or for beneficiaries with low-income subsidy were excluded. As it is unclear whether proposed cost-sharing caps would apply before beneficiaries met their deductible,⁴ we also conservatively excluded claims in the deductible phase. The actual beneficiary out-of-pocket payment for each claim was compared with the proposed cost-sharing cap after standardizing supply periods ($2 for a ≤30-day supply, $4 for a 31- to 60-day supply, and $5 for a 61- to 90-day supply). Outcomes included (1) estimated beneficiary savings if proposed caps had been in effect in 2021 and (2) proportion of beneficiaries experiencing savings. Analyses were conducted using SAS version 9.4 (SAS Institute Inc). We followed the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guideline. The study was approved by the University of California, San Diego, as exempt because deidentified data were used in analyses.

Results

There were 381 million claims filled by 30.7 million non–low-income subsidy Part D beneficiaries for the 101 generic drugs in 2021. The mean (median) per-claim out-of-pocket payment was $5.30 ($2.10) (Table 1). Had the Medicare $2 drug list model been in place, mean (median) out-of-pocket payments would have been $2.00 ($2.00). Total mean (median) per-beneficiary and per-year out-of-pocket payment amounts would have declined from $66.10 ($24.30) to $24.50 ($12.00), generating mean (median) patient savings of $41.60 ($7.00).

Table 1. Expected Out-of-Pocket Savings for Medicare Part D Beneficiaries Associated With Proposed Medicare $2 Drug List Model, per Patient and per Claim.

	Mean (SD), $	Median (IQR), $
Measures per claim
Payment in 2021	15.2 (20.7)	9.3 (15.4)
Beneficiary out-of-pocket payment in 2021	5.3 (9.0)	2.1 (7.2)
Hypothetical beneficiary out-of-pocket payment in 2021 at proposed capsa	2.0 (2.0)	2.0 (4.0)
Patient savingsb	3.3 (7.9)	0.0 (3.6)
Measures per patient and year
Payment in 2021	189.2 (234.9)	114.0 (225.8)
Beneficiary out-of-pocket payment in 2021	66.1 (102.5)	24.3 (89.8)
Hypothetical beneficiary out-of-pocket payment in 2021 at proposed capsa	24.5 (30.8)	12.0 (38.8)
Patient savingsb	41.6 (79.5)	7.0 (49.0)

^a Patient payment amount that would have been observed under the cost-sharing caps proposed by the $2 generic list model ($2 for a ≤30-day supply, $4 for a 30- to 60-day supply, and $5 for a 61- to 90-day supply).³

^b Difference between actual patient payment amounts and patient payment amounts that would have been observed under the cost-sharing caps proposed by the $2 generic list model.

The 30.7 million beneficiaries accounted for more than $2 billion in payments for the 101 generic drugs in 2021 (Table 2). Had the Medicare $2 drug list model been in place, patient out-of-pocket payments would have totaled $751 million, or $1.28 billion (63%) less than observed, and 62.7% of beneficiaries using at least 1 of the generic drugs would have experienced savings in 2021. More than $400 million, or 32%, of patient savings would have been generated by 5 drugs: levothyroxine, atorvastatin, albuterol, metoprolol, and rosuvastatin.

Table 2. Expected Out-of-Pocket Savings for Medicare Part D Beneficiaries Associated With Proposed Medicare $2 Drug List Model.

	Total payments in 2021, $	Total beneficiary out-of-pocket payments in 2021, $	Total beneficiary out-of-pocket payments in 2021 at proposed caps, $a	Total patient savings, $b	Patient savings, per patient, $		Patients experiencing savings, %
					Mean	Median
All 101 drugs	5 804 230 111	2 026 910 694	751 089 125	1 275 821 568	41.60	7.00	62.7
Top 5 drugs by savings
Levothyroxine	404 359 942	132 098 669	46 349 637	85 749 033	16.50	2.00	53
Atorvastatin	475 814 330	143 409 345	60 215 251	83 194 093	8.60	0.00	32.4
Albuterol	253 416 295	93 212 460	10 725 437	82 487 024	35.10	16.50	88.5
Metoprolol	361 616 641	123 578 649	41 596 163	81 982 486	19.90	8.00	65.4
Rosuvastatin	348 089 921	102 832 246	26 474 043	76 358 203	23.20	2.00	53.4

^a Patient payment amount that would have been observed under the cost-sharing caps proposed by the $2 generic list model ($2 for a ≤30-day supply, $4 for a 30- to 60-day supply, and $5 for a 61- to 90-day supply).³

^b Difference between actual patient payment amounts and patient payment amounts that would have been observed under the cost-sharing caps proposed by the $2 generic list model.

Discussion

We estimate that Medicare Part D beneficiaries would have experienced a 63% reduction in out-of-pocket spending if the Medicare $2 drug list model had been in place in 2021. However, because these generic drugs generally had lower co-payments, savings per beneficiary were modest. Nevertheless, nearly all Part D beneficiaries were prescribed at least 1 generic drug in 2023,⁴ and only 20% (or about 8 million) were enrolled in plans that offered generic drugs for $2 (or less) for a month’s supply across all preferred and standard retail and mail-order pharmacies.³ Therefore, the Medicare $2 drug list model has the potential to lower generic drug out-of-pocket costs.

Our analyses expand on previous work modeling the effect of capping co-payments for 150 drugs identified by Cai et al⁵ prior to the Centers for Medicare & Medicaid Services announcement of the sample list of generic drugs. Our findings are limited by use of data that preceded the Part D $2000 annual out-of-pocket cap,⁶ after which beneficiary savings are expected to decrease. Lowering generic drug costs should continue to be a priority for reforms to Medicare Part D.

Supplement 1.

eAppendix. Description of the Sample Selection

eFigure. Flowchart for Selection of the Sample of Claims

eReferences

Supplement 2.

Data Sharing Statement