Perspective from David C. Robbins, MD
Disclosures: The authors report no relevant financial disclosures.
October 20, 2021
2 min read

Authorized generic drugs ‘insufficient’ to improve affordability in Medicare Part D

Perspective from David C. Robbins, MD
Disclosures: The authors report no relevant financial disclosures.
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Authorized generic drugs for insulin and direct-acting antiviral agents may lower out-of-pocket spending for patients but are unlikely to provide savings for Part D plans or Medicare, data show.

“Compared with brand-name drugs, authorized generic versions of direct-acting antiviral agents for hepatitis C and insulin would have resulted in lower out-of-pocket spending for Medicare beneficiaries,” Stacie B. Dusetzina, PhD, associate professor of health policy and the Ingram associate professor of cancer research at Vanderbilt University School of Medicine in Nashville, Tennessee, and colleagues wrote in JAMA Internal Medicine. “However, authorized generic drug coverage was limited for some Part D beneficiaries, with many beneficiaries in plans with coverage for only brand-name drugs. For Part D plan sponsors, this decision likely reflects rational economic behavior because net prices (after rebates) for brand-name drugs in these classes may be similar to or lower than net prices for authorized generic drugs.”

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As Healio previously reported, manufacturers of insulin and direct-acting antiviral agents for treating hepatitis C recently introduced authorized generic alternatives to their patented brand-name products during a time when the brand-name drugs faced no immediate threat of generic drug competition. The authorized generic drugs have list prices at least 50% lower than the list price of the brand-name drugs; the announcements followed congressional scrutiny over high drug prices.

In a cross-sectional study, Dusetzina and colleagues analyzed data from Medicare Prescription Drug Plan Formulary and Pricing Information Files from the third quarter of 2020 and Medicare Part D plan enrollment for September 2020. Researchers assessed coverage for four brand-name formulations of insulin and direct-acting antiviral agents and their authorized generic formulations: sofosbuvir and velpatasvir fixed-dose combination tablets (Epclusa, Gilead), ledipasvir and sofosbuvir tablets (Harvoni, Gilead), insulin lispro (Humalog, Eli Lilly) and insulin aspart (Novolog, Novo Nordisk).

“We selected these drugs because we believe they are the only ones that had authorized generic formulations launched more than 1 year before expected patent expiration and faced no traditional generic competition as of the third quarter of 2020,” the researchers wrote.

Primary outcomes were beneficiary-weighted formulary coverage of brand-name and authorized generic products; beneficiary out-of-pocket costs; and pre-rebate plan, manufacturer and Medicare spending on brand-name and authorized generic products.

In the third quarter of 2020, 97% of beneficiaries were in plans that covered brand-name drugs only or both brand-name and authorized generic drugs. Approximately 3% of beneficiaries were in plans that covered authorized generic drugs only.

Researchers found that authorized generic drug list prices were 67%, 62% and 50% lower than list prices for Epclusa, Harvoni and each brand-name insulin product, respectively. “Medicare beneficiaries using authorized generic drugs could save $270 per year for 12 vials of Humalog and $2,974 for a full course of Harvoni,” the researchers wrote.

Plans, however, have limited incentives to encourage authorized generic drug use; rebates for brands likely exceed savings available with authorized generic drugs, particularly for beneficiaries with spending that reaches the Medicare Part D coverage gap.

“Ultimately, the availability of authorized generic options for products not facing traditional generic competition is insufficient to improve affordability for Medicare beneficiaries,” the researchers wrote. “The results of this study suggest that efforts to modify the Medicare Part D benefit should also ensure that incentives for plans and beneficiaries are well aligned and that beneficiaries do not overpay for drugs that are a better value for their health plan and the Medicare program.”