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Medicare Generic Drug Prices Drop 9.6%; Formulary to Be Updated
20 May 08
A study conducted by U.S. non-governmental organisation (NGO) AARP has indicated that the average generic drug price dropped by 9.6% in 2007—the lowest rate since 2003—even as plans to increase the expansion of Medicare gather pace.
Global Insight Perspective | | Significance | The AARP study points a declining trend in generic drug prices, with 43 drugs in the 185-sample drug basket experiencing a maximum price drop of 69.5%. Prices of Metformin, mirtazapine and lisinopril dropped significantly. | Implications | The study findings will boost the inclusion of generic drugs in Medicare, even as the Centers for Medicaid and Medicare Services (CMS) plans to update the formulary, which will see 1,500 drug codes left out. The CMS's move is expected to limit the scope of reimbursed treatments to beneficiaries under commercial health plans. | Outlook | The study recommends increased usage of generic drugs, while the CMS's review of drug formularies may increase out-of-pocket expenditure. |
AARP Study In its latest report, Trends in Manufacturer Prices of Generic Prescription Drugs Used by Medicare Beneficiaries, U.S.-based non-governmental organisation (NGO) AARP found that the average generic price change was a 9.6% drop for most widely used generic prescription drugs in 2007. This marked an increase from a 2.5% drop in 2006. The survey took into account a basket of 185 generic prescription products, wherein manufacturers changed prices for 52 drugs and left 133 unchanged. Off the 52 drugs, 22 drugs experienced a price decline of 25.1-50.0%, 17 declined by 1-25%, nine fell by a maximum of 45.5%, and four drug price declines were in the 50.1-69.5% range. Metformin, lisinopril and mirtazapine witnessed the highest drop in manufacturer prices at 69.5%, 54.2% and 49.8%, respectively. Average Annual Manufacturer Price Change, 2007 | Company | No. of Drugs in Formulary | Average % Change by Manufacturer | Mutual Pharma | 3 | 12.7 | Upsher Smith | 4 | 0.2 | Mylan | 39 | -3.8 | Ranbaxy | 2 | -5.4 | Dr Reddy's | 4 | -5.4 | Sandoz | 17 | -7.8 | Taro Pharma | 2 | -9.2 | Prasco Labs | 3 | -11.3 | Dey Labs | 2 | -13 | Teva | 34 | -15.3 | Actavis Mid Atl/Eliza | 3 | -26 | Ivax | 12 | -28.9 | Lek Pharma | 3 | -33.6 | Source: AARP |
CMS Formulary Update The Centers for Medicaid and Medicare Services (CMS) is reviewing strategies for increasing enrolment into the Medicare drug benefit low-income subsidy schemes, gathering data on target population, according to a Kaiser Network report, citing CQ HealthBeat. The report also highlighted the removal of 1,500 drug codes by the CMS from its Part D formulary, owing to products found not to be approved by the U.S. FDA and the presence of non-prescription products. Furthermore, the mandatory review of private health plans could be affected as the FDA is reported to be unable to provide data relating to approved marketed products in the United States. Outlook and Implications The AARP report signifies the increasing usage of generic prescription drugs in Medicare Part D. The study highlights the average change in manufacturer prices and the impact on therapeutic categories, with the largest declines in antihypertensives, diabetes and cholesterol agents, of up to 36.8% in 2007. Manufacturer drug price changes will influence costs for Medicare, considering that prescription drug expenditure is reported as one of the largest cost components for the benefit schemes. Although the CMS has maintained that the removal of 1,500 codes will not affect beneficiary coverage, a small impact is expected. In addition, commercial health plans may reduce their treatment following the CMS move, thereby encouraging out-of-pocket payments for drugs not covered by the formulary. It is also observed that therapy switches could also be witnessed as a result of the removal of the said codes from the formulary. The enrolment increase, on the other hand, is expected to be boosted by the relaxation of some penalties. However, the CMS's drive is facing some resistance, as has been highlighted in the report, including perceived higher costs under the drug benefit schemes. The schemes currently cover 80% of the target population and in 2008 recorded a 6.2% rise in enrolees at 25.4 million, as of 1 January 2008 (see United States: 5 February 2008: CMS Forecasts Medicare Cost Decrease Despite Rise in Plan Enrolees). However, the CMS has altered its projections for Medicare prescription benefit spending by US$117 billion over the next decade.
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