Medicare Spending and Potential Savings on Brand-Name Drugs With Available Generic Substitutes Excluded by 2 Large Pharmacy Benefit Managers, 2012 Through 2015

Abstract

This study uses Medicare Part D drug utilization and spending data to estimate potential Part D program and beneficiary savings on brand-name medications excluded by pharmacy benefit managers for which generic substitutes are available.

The Centers for Medicare and Medicaid Services (CMS) Part D program provided prescription drug coverage to 40.8 million beneficiaries in 2016. Between 2012 and 2015, the program spent $397.8 billion on prescription drugs, while beneficiary out-of-pocket costs totaled $54.6 billion. Over the next decade, spending is projected to increase by 77%. Several large pharmacy benefit managers (PBMs) have attempted to limit prescription drug costs by using formulary drug exclusion lists, but the extent to which these apply to Medicare Part D plans is unknown. These lists identify brand-name medications that are ineligible for coverage and specify either covered brand-name and/or lower-cost, generic substitutes. We estimated potential Part D program and beneficiary savings on medications excluded by PBMs for which generic substitutes are available.

Methods

Because this study used only Medicare spending data and no patient-level data, it was exempt from institutional review board review. We identified all brand-name medications from publicly available formulary exclusion lists, using CVS Caremark’s from 2012 through 2015 and Express Scripts’ in 2014 and 2015, along with generic medications specified as substitutes. These PBMs are the 2 largest in the United States, providing prescription drug coverage for approximately 50.1 million and 76.7 million individuals, respectively. We limited the sample to exclusion-listed drugs for which Part D program spending data were available and for which generic substitutes were available in the same formulation.

We then used 2012 through 2015 Medicare Part D drug utilization and spending data to determine actual annual CMS and beneficiary out-of-pocket spending on exclusion-listed medications. Projected spending if generic substitution had taken place was estimated by averaging the annual cost of generic medications specified as substitutes that year, prioritizing bioequivalent generic substitution when available, as opposed to within-class, generic therapeutic alternatives. Out-of-pocket spending was calculated for both low-income subsidy beneficiaries, who qualify for additional cost-sharing assistance, and non–low-income subsidy beneficiaries. Potential savings were calculated by subtracting projected spending on generic substitutes from actual spending on exclusion-listed medications. All calculations were performed using Microsoft Excel, version 15.2.8.

Results

Between 2012 and 2015, CVS Caremark and Express Scripts listed 154 unique medications as excluded. Specific Part D spending data were unavailable for 26 and only brand-name substitutes were listed for 66. Among 62 remaining unique medications (eTable in the Supplement), 19, 27, 48, and 55 were exclusion listed each year from 2012 to 2015, including 9 (19%) and 9 (16%) by both PBMs in 2014 and 2015, respectively. Bioequivalent generic substitutes were available for 19 (31%), and generic therapeutic alternatives for 43 (69%).

The CMS spent $3.6 billion on these exclusion-listed medications (Table 1). We estimated that CMS could have saved $2.9 billion by substituting generic medications. Potential savings increased from $138.4 million in 2012 to $1.2 billion in 2015, as more drugs were exclusion listed by PBMs.

Table 1. Centers for Medicare and Medicaid Services (CMS) Part D Spending for Drugs on CVS Caremark and Express Scripts Formulary Exclusion Lists and Potential Savings Through Generic Substitution, 2012-2015.

Parameter	Year
	2012	2013	2014a	2015a	Total (Unique)b
Excluded drugs, No.	19	27	48 (9)	55 (9)	149 (62)
Excluded drugs with a bioequivalent generic substitute, No.	1	4	14 (1)	18 (0)	37 (19)
Excluded drugs with only therapeutic generic substitutes, No.	18	23	34 (8)	37 (9)	112 (43)
Therapeutic generic substitutes, No.	28	44	93 (24)	122 (43)	287 (151)
CMS spending on excluded drugs, $	183 487 318	846 732 825	1 180 103 354 (27 415 545)	1 396 504 737 (90 665 200)	3 606 828 233
Projected CMS spending if generics had been substituted, $	45 097 054	262 737 040	219 596 661 (7 612 062)	174 403 662 (5 021 370)	701 834 416
Potential CMS savings if generics had been substituted, $	138 390 265	583 995 784	960 506 693 (19 803 483)	1 222 101 075 (85 643 830)	2 904 993 817

^aNumbers in parentheses represent the value only among the drugs excluded by both CVS Caremark and Express Scripts in a given year.

^bMany of the formulary-excluded drugs and generic substitutes are listed in multiple years. The “unique” value refers to the total unique excluded drugs and unique generic substitutes per excluded drug between 2012 and 2015.

Low-income subsidy and non–low-income subsidy beneficiaries filled 1.4 million and 2.6 million prescriptions, respectively, for these exclusion-listed medications (Table 2), spending $23.9 million and $624.0 million out-of-pocket, respectively. We estimated that low-income subsidy and non–low-income subsidy beneficiaries could have potentially saved $14.8 million and $479.1 million, respectively ($10.84 and $186.72 per prescription), by substituting generic medications.

Table 2. Medicare Part D Beneficiary Spending for Drugs on CVS Caremark and Express Scripts Formulary Exclusion Lists and Savings Through Generic Substitution, 2012-2015, Stratified by Qualification for Low-Income Subsidy.

Parameter	Year
	2012	2013	2014a	2015a	Total
Low-Income Subsidy Beneficiaries
Prescriptions filled by beneficiaries, No.	121 350	401 689	458 875 (19 425)	381 470 (24 022)	1 363 384
Beneficiary out-of-pocket costs on excluded drugs, $	1 791 559	7 558 744	7 682 408 (287 130)	6 828 236 (330 743)	23 860 948
Projected beneficiary out-of-pocket costs if generics had been substituted, $	592 161	2 732 674	3 218 884 (96 921)	2 532 001 (123 113)	9 075 720
Potential beneficiary savings if generics had been substituted, $	1 199 398	4 826 070	4 463 524 (190 209)	4 296 235 (207 630)	14 785 227
Potential beneficiary savings if generics had been substituted, per prescription, $	9.88	12.01	9.73 (9.79)	11.26 (8.64)	10.84
Non–Low-Income Subsidy Beneficiaries
Prescriptions filled by beneficiaries, No.	187 178	736 786	890 504 (43 459)	751 478 (39 558)	2 565 946
Beneficiary out-of-pocket costs on excluded drugs, $	44 405 639	164 246 734	212 705 832 (9 072 822)	202 679 587 (9 238 821)	624 037 793
Projected beneficiary out-of-pocket costs if generics had been substituted, $	7 793 885	44 714 178	51 604 031 (1 836 601)	40 812 174 (1 520 732)	144 924 268
Potential beneficiary savings if generics had been substituted, $	36 611 754	119 532 557	161 101 800 (7 236 220)	161 867 413 (7 718 090)	479 113 524
Potential beneficiary savings if generics had been substituted, per prescription, $	195.60	162.24	180.91 (166.51)	215.40 (195.11)	186.72
All Beneficiaries
Prescriptions filled by beneficiaries, No.	308 528	1 138 475	1 349 379 (62 884)	1 132 948 (63 580)	3 929 330
Beneficiary out-of-pocket costs on excluded drugs, $	46 197 198	171 805 479	220 388 239 (9 359 951)	209 507 824 (9 569 564)	647 898 740
Projected beneficiary out-of-pocket costs if generics had been substituted, $	8 386 046	47 446 852	54 822 915 (1 933 522)	43 344 175 (1 643 845)	153 999 988
Potential beneficiary savings if generics had been substituted, $	37 811 152	124 358 627	165 565 324 (7 426 429)	166 163 648 (7 925 719)	493 898 752
Potential beneficiary savings if generics had been substituted, per prescription, $	122.55	109.23	122.70 (118.10)	146.66 (124.66)	125.70

^aNumbers in parentheses represent the value only among the drugs excluded by both CVS Caremark and Express Scripts in a given year.

Discussion

Our analysis suggests that between 2012 and 2015 CMS and Part D program beneficiaries could have realized nearly $3.4 billion in savings if the program had required generic substitution of 62 brand-name medications excluded by 2 large PBMs. Although formulary-excluded drugs represent only a small number of brand-name medications for which lower-cost generic medications might be substituted, and the potential 2015 savings represented only 1% of CMS prescription drug spending, our findings suggest clear opportunities to reduce costs using strategies already in place at large PBMs.

This study was limited to brand-name medications excluded by CVS Caremark and Express Scripts; formulary exclusion lists are being increasingly adopted, leading to potentially greater savings. Furthermore, we cannot account for manufacturer rebates and discounts, which are substantial for some brand-name medications. In addition, we may have overestimated CMS spending and potential savings because we assumed complete generic and therapeutic alternative substitution. Other factors, however, including patient-specific risk-benefit considerations, may influence medication choice and not all substitutions may be clinically appropriate.

Supplement.

eTable. 62 Brand-Name Drugs with Generic Substitutes on CVS Caremark and/or Express Scripts Formulary Exclusion Lists, 2012-2015