Cost Variability of Suggested Generic Treatment Alternatives Under the Medicare Part D Benefit

BACKGROUND: The substitution of generic treatment alternatives for brand-name drugs is a strategy that can help lower Medicare beneficiary out-of-pocket costs. Beginning in 2011, Medicare beneficiaries reaching the coverage gap received a 50% discount on the full drug cost of brand-name medications and a 7% discount on generic medications filled during the gap. This discount will increase until 2020, when beneficiaries will be responsible for 25% of total drug costs during the coverage gap. OBJECTIVES: To examine the cost variability of brand and generic drugs within 4 therapeutic classes before and during the coverage gap for each 2011 California stand-alone prescription drug plan (PDP) and prospective coverage gap costs in 2020 to determine the effects on beneficiary out-of-pocket drug costs. METHODS: Equivalent doses of brand and generic drugs in the following 4 pharmacological classes were examined: angiotensin II receptor blockers (ARBs), bisphosphonates, HMG-CoA reductase inhibitors (statins), and proton pump inhibitors (PPIs). The full drug cost and patient copay/coinsurance amounts during initial coverage and the coverage gap of each drug was recorded based on information retrieved from the Medicare website. These drug cost data were recorded for 28 California PDPs. RESULTS: The highest cost difference between a brand medication and a Centers for Medicare Medicaid Services (CMS)-suggested generic treatment alternative varied between $110.53 and $195.49 at full cost and between $51.37 and $82.35 in the coverage gap. The lowest cost difference varied between $38.45 and $76.93 at full cost and between -$4.11 and $18.52 during the gap. CONCLUSIONS: Medicare beneficiaries can realize significant out-of-pocket cost savings for their drugs by taking CMS-suggested generic treatment alternatives. However, due to larger discounts on brand medications made available through recent changes reducing the coverage gap, the potential dollar savings by taking suggested generic treatment alternatives during the gap is less compelling and will decrease as subsidies increase.