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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
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
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
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
1.
Hoadley  J, Cubanski  J, Neuman  T. Medicare Part D in 2016 and trends over time. Henry J. Kaiser Family Foundation website. Published September 16, 2016. https://www.kff.org/report-section/medicare-part-d-in-2016-and-trends-over-time-section-1-part-d-enrollment-and-plan-availability/. Accessed July 20, 2017.
2.
Centers for Medicare and Medicaid Services. 2015 Medicare Drug Spending Data. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/2015MedicareData.html. Accessed July 20, 2017.
3.
Congressional Budget Office. The Budget and Economic Outlook: 2015-2025. https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/49892-Outlook2015.pdf. Accessed July 20, 2017.
4.
Health Strategies Group. Pharmacy Benefit Managers. http://www.healthstrategies.com/sites/default/files/agendas/2015_PBM_Research_Agenda_RA_110714.pdf. Accessed July 20, 2017.
5.
Johansen  ME, Richardson  C.  Estimation of potential savings through therapeutic substitution.  JAMA Intern Med. 2016;176(6):769-775.PubMedGoogle ScholarCrossref
Research Letter
April 2018

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

Author Affiliations
  • 1Collaboration for Research Integrity and Transparency, Yale University, New Haven, Connecticut
  • 2Section of General Internal Medicine, Yale School of Medicine, New Haven, Connecticut
  • 3Robert Wood Johnson Foundation Clinical Scholars Program, Veterans Affairs Connecticut Healthcare System, New Haven
JAMA Intern Med. 2018;178(4):567-569. doi:10.1001/jamainternmed.2017.8016

The Centers for Medicare and Medicaid Services (CMS) Part D program provided prescription drug coverage to 40.8 million beneficiaries in 2016.1 Between 2012 and 2015, the program spent $397.8 billion on prescription drugs, while beneficiary out-of-pocket costs totaled $54.6 billion.2 Over the next decade, spending is projected to increase by 77%.3 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.4 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.2 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.5 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.

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.

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.

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Article Information

Accepted for Publication: November 16, 2017.

Corresponding Author: Sanket S. Dhruva, MD, MHS, Robert Wood Johnson Foundation Clinical Scholars Program, Veterans Affairs Connecticut Healthcare System, 333 Cedar St, SHM I-456, PO Box 208088, New Haven, CT 06520-8088 (sanket.dhruva@yale.edu).

Published Online: January 16, 2018. doi:10.1001/jamainternmed.2017.8016

Author Contributions: Mr Egilman and Dr Dhruva had full access to all of the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis.

Study concept and design: Egilman, Ross, Dhruva.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: Egilman.

Critical revision of the manuscript for important intellectual content: All authors.

Statistical analysis: Egilman, Wallach.

Study supervision: Ross.

Conflict of Interest Disclosures: In the past 36 months, Dr Ross has also received support through Yale University from the Centers for Medicare and Medicaid Services to develop and maintain performance measures that are used for public reporting, from Johnson and Johnson to develop methods of clinical trial data sharing, from Medtronic, Inc, and the US Food and Drug Administration (FDA) to develop methods for postmarket surveillance of medical devices, from the FDA as part of the Centers for Excellence in Regulatory Science and Innovation program, and from the Blue Cross Blue Shield Association to better understand medical technology evaluation. No other disclosures are reported.

Funding/Support: This project was conducted as part of the Collaboration for Research Integrity and Transparency at Yale University, funded by the Laura and John Arnold Foundation, which supports Mr Egilman and Drs Wallach and Ross. Dr Dhruva is supported by the Robert Wood Johnson Foundation Clinical Scholars Program and the Department of Veterans Affairs.

Role of the Funder/Sponsor: The Laura and John Arnold Foundation and other funders had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Disclaimer: The authors assume full responsibility for the accuracy and completeness of the ideas presented, which do not represent the views of the Department of Veterans Affairs or any other supporting institutions.

References
1.
Hoadley  J, Cubanski  J, Neuman  T. Medicare Part D in 2016 and trends over time. Henry J. Kaiser Family Foundation website. Published September 16, 2016. https://www.kff.org/report-section/medicare-part-d-in-2016-and-trends-over-time-section-1-part-d-enrollment-and-plan-availability/. Accessed July 20, 2017.
2.
Centers for Medicare and Medicaid Services. 2015 Medicare Drug Spending Data. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/2015MedicareData.html. Accessed July 20, 2017.
3.
Congressional Budget Office. The Budget and Economic Outlook: 2015-2025. https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/49892-Outlook2015.pdf. Accessed July 20, 2017.
4.
Health Strategies Group. Pharmacy Benefit Managers. http://www.healthstrategies.com/sites/default/files/agendas/2015_PBM_Research_Agenda_RA_110714.pdf. Accessed July 20, 2017.
5.
Johansen  ME, Richardson  C.  Estimation of potential savings through therapeutic substitution.  JAMA Intern Med. 2016;176(6):769-775.PubMedGoogle ScholarCrossref
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