Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher Medicare and Beneficiary Spending

WHY WE DID THIS STUDY

In the last decade, Medicare Part D and its beneficiaries spent billions of dollars on revolutionary yet costly hepatitis C drugs. In response to concerns over the affordability of hepatitis C treatments, drug manufacturer Gilead introduced authorized generic versions of two of its brand-name hepatitis C drugs in 2019 (authorized generics are brand-name drugs that are sold without the brand name on their label). Despite the availability of these authorized generics, as well as other lower-cost brand options, preliminary research suggested that Part D beneficiaries continued to be more likely to use higher-cost hepatitis C drugs than Medicaid beneficiaries, leading to higher spending in Part D. Reflecting on OIG's goal of identifying opportunities to lower prescription drug spending for patients and programs, we conducted this review to explore possible incentives created by Part D's programmatic structure that may be influencing use of higher-cost hepatitis C drugs in Medicare.

HOW WE DID THIS STUDY

We used claims data to compare utilization of hepatitis C drugs in Medicare Part D to utilization in Medicaid in 2019 and 2020. We also compared inclusion of higher-cost versus lower-cost hepatitis C drugs in 2020 Part D plan formularies. We then examined the effects utilization trends have on Medicare and beneficiary spending.

WHAT WE FOUND

Following the introduction of authorized generic versions of two brand-name hepatitis C drugs-Epclusa and Harvoni-in 2019, use of the authorized generic versions increased in Medicaid at greater rates than in Medicare Part D. In 2020, some Part D plans did not cover the authorized generics, limiting beneficiary access to less costly options. Medicare beneficiaries also were less likely to use other lower-cost brand-name options in 2020 compared to Medicaid beneficiaries.

Although rebates from manufacturers reduced overall Part D spending for higher-cost hepatitis C drugs (like Epclusa and Harvoni), they provided little relief to beneficiaries or the Medicare program. Part D beneficiaries without financial assistance paid, on average, $2,200 more out of pocket for higher-cost hepatitis C drugs in 2020. Further, Medicare's average catastrophic coverage payment for a beneficiary prescribed a higher-cost drug was over $8,000 more compared to a beneficiary prescribed a lower-cost drug. As a result, Medicare spent $155 million more in catastrophic coverage payments for higher-cost hepatitis C drugs, despite a similar number of beneficiaries in each cost group reaching catastrophic coverage.

OIG's findings about utilization trends for higher-cost hepatitis C drugs in Medicare align with experts' suggestions that certain programmatic factors, such as manufacturer rebates, may be providing incentives for Part D plan sponsors to prefer their enrollees use higher-cost drugs.

WHAT WE RECOMMEND

We recommend that-to reduce out-of-pocket costs for beneficiaries and combat rising drug spending in Medicare Part D-CMS encourage Part D plans to increase access to and use of the authorized generic versions of Epclusa and Harvoni, within the authorities granted under statute. We also recommend that CMS pursue additional strategies-such as educating providers and pharmacies-to increase access to and use of lower-cost hepatitis C drugs in Part D.