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Increasing Access to Generics and Biosimilars in Medicare

Thought Leader: Seema Verma
February 5, 2020
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Increasing Access to Generics and Biosimilars in Medicare

Under the leadership of President Trump, CMS is committed to lowering prescription drug prices for all Americans.  A key component of our strategy is strengthening competition among generic and biosimilar medicines.  Competition in the market for prescription drugs lowers costs and improves access for patients.  Generic and biosimilar products typically launch at a lower cost than the corresponding branded drug or biologic to attract market share – and when generics and biosimilars arrive on the market, the price of the brand or biologic can drop in response.

While competition lowers costs, sometimes it can take multiple competitors arriving on the market for costs to drop substantially.  And even once prices fall, health insurance plans sometimes prefer the original higher-priced product if they can negotiate a larger rebate payment from manufacturers for it, and then apply the rebate to reduce beneficiary premiums.  Therefore, across all of our programs, CMS has worked to promote market competition to lower costs and improve quality.

Generic Utilization Today

CMS closely tracks the use of generic prescription drugs in Part D.  Plans are already achieving high utilization rates, but there is room to do better.  Here is a summary of the trends we are currently seeing for generics.

In 2017, the “generic dispensing rate” – which is the percent of all Prescription Drug Events (essentially, the percent of all prescription drug fills) that was for generic drugs – was 82.2% in Part D.  If we only look at Part D prescription drug fills for which an approved generic drug was on the market for the same strength, route of administration, and dosage form, the generic was used 90.8% of the time in 2017; this was the “generic substitution rate.”

In addition to tracking the overall rates of use of generic drugs, CMS monitors Part D formularies to see how often plans are making generics readily available to enrollees.  After ensuring beneficiary protections, CMS provides plans with flexibility in designing benefit packages so plans can put together options that are attractive to beneficiaries through their negotiations with manufacturers.  Nevertheless, CMS tracks plan formulary composition closely.  From 2017-2019, thirty-two new generic drugs were approved and added to the list that Part D plans use to create their formularies.  In 2019, for those thirty-two new brand-generic drug combinations:

In the majority of cases in which Part D plans do not cover new generics, those generics are higher in cost than what would typically be expected for generic drugs.  Similarly, in looking at formulary patterns for all generic products, the agency has found that when plans place generic drugs on higher tiers with larger copays, the price of those generics is typically at least twice as high as the price of generic drugs on lower tiers.  Not all generics come at a substantially lower cost than the original product.  It is critical that plans be empowered to negotiate for rebates and other discounts, and that they not be required to automatically cover generics in a particular way regardless of costs.
Some have suggested that CMS dictate that all generic drugs go on particular tiers with favorable cost sharing amounts.  However, CMS’s authority to regulate plan negotiations with manufacturers is limited in statute by the non-interference clause, which prohibits interference in negotiations between plans and manufacturers and pharmacies.  Moreover, making plans

Nevertheless, there remains additional opportunity for Part D plans to make generic drugs available, so we committed from day one to encourage innovation in these products to bolster competition and drive down prescription drug prices.

Promoting Generic Competition

Our agency has already taken action across-the-board to remove barriers that inhibit generic and biosimilar competition.  In 2017, we finalized a rule to improve competition for biosimilars by giving each new biosimilar its own payment code for Medicare Part B; and in 2018, we permitted Part D plans to substitute generic prescription drugs onto their formularies more quickly and allowed Medicare Advantage plans to have beneficiaries start on a biosimilar product before trying the corresponding biologic.

In Part II of the Advance Notice of Methodological Changes for Calendar Year (CY) 2021 for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (Advance Notice), the agency is announcing additional efforts to advance this goal.  CMS is considering whether and how to develop measures of generic and biosimilar utilization in Medicare Part D for possible use in the calculation of a plan’s star rating.  Therefore, the agency could reward plans based on the rate at which they encourage market adoption of these competitor products to lower costs for patients.  In the Advance Notice, CMS puts forth three potential measure concepts, which are listed below, and we ask stakeholders for comments on these concepts and for any additional information they can provide on barriers to generic uptake.

Star Ratings and Transparency

Star Ratings are used by beneficiaries to select plans and therefore are a powerful motivator and signal of quality for MA and Part D plans. That’s why we’re proposing additional improvements to the Star Ratings program.  In the proposed rule for Medicare Advantage and Part D for 2021, the agency is proposing to increase the impact that patient experience and access measures have on a plan’s star rating, as we recognize that one of the best indicators of a plan’s quality is how enrollees feel about their coverage experience.

Also in the proposed rule, we’re seeking comment on potential star ratings that could incentivize the uptake of a standard set of measures for plans to use in evaluating pharmacy performance.  CMS has heard concerns from pharmacies that the measures plans use to assess their performance are unattainable or otherwise unfair.  Encouraging the use of a standard set of measures, once the industry establishes one, could ensure a more fair and transparent process.

Our efforts to shine a light on pharmacy quality don’t stop there.  Currently, Part D plans do not have to disclose to CMS the measures that they use to evaluate pharmacies.  The 2021 Medicare Advantage and Part D proposed rule would require Part D plans to share these measures with CMS.  That way, CMS could track and share publicly how plans are assessing

The 2021 proposed rule for Medicare Advantage and Part D is the third proposed rule for these programs issued under the Trump Administration.  It reflects the Administration’s commitment to rolling up its sleeves and improving these programs for our nation’s seniors.  We are aiming to ensure that every senior has access to a plan that meets his or her unique healthcare needs; and we want plans to attract beneficiaries by improving quality and reducing costs.  Those goals can only be accomplished by increasing competition, promoting value, and moving away from an increasingly outdated fee-for-service system.

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