Costs for Seniors Jump as Generic Drugs Move to Higher Formulary Tiers in Part D Plans

Senior citizens with Medicare prescription drug plans, known as Part D plans, are paying more for generic prescriptions even as the market price of these drugs stays flat, an analysis released by Avalere found, because, over time, the generic drugs are being placed on higher formulary tiers where patients pay more out-of-pocket costs.

The number of generic prescription drugs placed on the least-costly lowest tier fell 53% between 2011 and 2015. This shift resulted in a 93% increase in total patient cost sharing for these drugs, or a total of $6.2 billion.

This higher cost sharing and shift of generics to higher tiers did not correspond with an increase in the underlying price of generic drugs over those years, according to the analysis of the average volume-weighted price of generics that were included on plan formularies in both 2011 and 2015.

“It shows that the price to the consumer is rising much more rapidly than the price of the drugs,” said Dan Mendelson, president of Avalere, in an interview with The American Journal of Managed Care^®.

In 2011, 71% of generic drugs were placed on tier 1, the lowest tier in the formulary. By 2015, 19% of covered generics were placed on tier 1, while 46% were placed on tier 2 and 35% were placed on tier 3 or higher.

Avalere's analysis did not look at which drug classes shifted the most, although diabetes drugs and hypertensive drugs are 2 of the biggest categories used by those in the Part D population. Mendelson said the analysis "reflects the general trend of more expensive generic drugs."

“Patients are paying more at the pharmacy counter,” he said.

Three companies—UnitedHealth, Humana, and CVS Health—cover just more than half of the Part D market, according to the Kaiser Family Foundation. Kaiser said tier 2 for generic drugs, meaning nonpreferred tiers, became common in 2012.

The Part D plans are trying to do a balancing act, Mendelson said, between balancing price and knowing that these medications, such as ones to control blood pressure, diabetes, or other chronic diseases, are needed to be taken regularly in order to maintain good health, and not be deterred by cost.

"It’s really important that patients take their medications," he said. "You want them to comply."

Avalere said the analysis was funded by the Association for Accessible Medicines, formerly known as the the Generic Pharmaceutical Association, although Avalere said it retained control over the editorial content of the analysis.