Medicare $2 Drug List Model Could Have Reduced 2021 Out-of-Pocket Generic Costs

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, according to a research letter published today in JAMA.¹

The researchers highlighted that generic drugs account for 90% of prescription fills and 62% of patient out-of-pocket costs in the US. To help lower drug costs, HHS Secretary Xavier Becerra proposed 3 payment and delivery models in February 2023, including the Medicare $2 drug list model.² This model would cap beneficiary cost-sharing at $2 for a 30-day supply or $5 for a 90-day supply for a sample list of 101 generic drugs.³

Consequently, the researchers conducted a study evaluating how much Medicare Part D beneficiaries would have saved if the Medicare $2 drug list model had been in place in 2021.¹

The researchers emphasized the need for ongoing research and advocacy to further address drug affordability. | Image Credit: driftwood - stock.adobe.com

Using 2021 Medicare Part D claims data, they identified claims for the 101 generic drugs in the sample list. However, the researchers excluded claims exceeding 90 days of supply, claims from beneficiaries with low-income subsidies, and claims in the deductible phase; they noted that it is unclear whether proposed cost-sharing caps would apply before beneficiaries met their deductible.

The study's primary outcomes included the estimated beneficiary savings under the proposed cost-sharing caps and the proportion of beneficiaries who would have benefited. After standardizing supply periods, actual out-of-pocket costs per claim were compared with the model's proposed limits ($2 for a ≤ 30-day supply; $4 for a 31- to 60-day supply; $5 for a 61- to 90-day supply).

The researchers identified 381 million claims for the 101 generic drugs filled by 30.7 million eligible Part D beneficiaries in 2021. They found that the mean (median) per-claim out-of-pocket spending was $5.30 ($2.10), but this would have dropped to $2.00 ($2.00) under the Medicare $2 drug list model.

Therefore, mean (median) annual out-of-pocket spending per beneficiary would have declined from $66.10 ($24.30) to $24.50 ($12.00), generating mean (median) patient savings of $41.60 ($7.00).

In 2021, the 30.7 million beneficiaries accounted for over $2 billion in payments for the 101 generic drugs. Under the Medicare $2 drug list model, patient out-of-pocket payments would have totaled $751 million, or $1.28 billion (63%) less than observed.

Consequently, 62.7% of beneficiaries using at least 1 of the generic drugs would have experienced savings in 2021. In particular, over $400 million (32%) of patient savings would have been generated by 5 drugs: albuterol, metoprolol, levothyroxine, atorvastatin, and rosuvastatin.

"Our findings show that reducing cost sharing to a predictable, standardized amount for these medications used by a substantial majority of Medicare beneficiaries would lead to modest savings for patients," A. Mark Fendrick, MD, senior study author, director of the University of Michigan Center for Value-Based Insurance Design, and co–editor in chief of The American Journal of Managed Care^® (AJMC^®), told AJMC over email. "Given that most Americans say the out-of-pocket costs are a top health concern, and that price transparency and lowering drug prices are key Trump administration priorities, reducing the amount that seniors pay for their generic drugs should remain a vital policy strategy."

Lastly, the researchers acknowledged the study’s limitations, including that their findings were based on data that preceded the Part D $2000 annual out-of-pocket cap. As a result, future beneficiary savings estimates may be lower due to this cap. They concluded by emphasizing the need for ongoing research and advocacy to further address drug affordability.

“Lowering generic drug costs should continue to be a priority for reforms to Medicare Part D,” the authors wrote.

References

1. Hernandez I, Gabriel N, Pathak Y, Hansen RN, Sullivan SD, Fendrick AM. Projected out-of-pocket savings of the Medicare Part D $2 drug list model. JAMA. doi:10.1001/jama.2025.2028
2. The Use of Medicines in the US 2024. IQVIA Institute. May 7, 2024. Accessed March 24, 2025. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us-2024
3. McCormick B. CMS releases preliminary drug list for Medicare $2 drug list model. AJMC^®. October 10, 2024. Accessed March 24, 2025. https://www.ajmc.com/view/cms-releases-preliminary-drug-list-for-medicare-2-drug-list-model