By Eleanor Laise
For Medicare patients struggling to afford the Biogen /zigman2/quotes/201531540/composite BIIB -0.17% multiple sclerosis drug Tecfidera, the arrival last year of far cheaper generic competitors should have been great news. Instead, it has become a cautionary tale about the Medicare prescription-drug benefit’s complexities proving costly to patients and taxpayers, drug-pricing researchers say.
Looking at Medicare prescription-drug plans offering any coverage of Tecfidera or its generic equivalent as of the third quarter of this year, drug-pricing research nonprofit 46brooklyn Research found that more than half of enrollees had access only to the brand-name drug—despite the fact that multiple lower-cost generic options have been available for about a year. Even when plans did cover the generic, the cost was generally far higher than the cheapest generic’s list price, the researchers found.
“It’s a series of broken incentives that lead to this type of outcome,” says 46brooklyn CEO Antonio Ciaccia, including issues with “rebates,” or discounts that drugmakers often pay to Part D plan sponsors and other middlemen after a drug is dispensed.
“Just having generics in the market doesn’t mean that people can get them, or that they are affordable,” says Bari Talente, executive vice president of advocacy and healthcare access for the National Multiple Sclerosis Society. The group has heard from patients and healthcare providers about challenges with Tecfidera and generic access that echo 46brooklyn’s findings, Talente says.
The research adds to a growing number of studies illustrating how generic competition for pricey specialty drugs, when filtered through the convoluted Medicare Part D prescription-drug system, can fail to generate cost savings for patients.
The findings come as Congress weighs prescription-drug pricing and Medicare Part D reforms as part of the Build Back Better social spending bill. President Joe Biden highlighted the issue in a speech this week, noting that the bill would cap Medicare beneficiaries’ out-of-pocket prescription-drug costs at $2,000 per year, among other changes.
For many Medicare patients, it was as if the price war never happened
Broadly speaking, most Part D plans are designed to favor the use of generics over brand-name drugs, according to a 2020 study published in Health Affairs. Looking at the plans’ coverage of brand names versus generic equivalents, the researchers found that the plans had generic-only coverage in more than 80% of cases. But “there are obviously some major exceptions to this rule,” says Stacie Dusetzina, associate professor at Vanderbilt University Medical Center and co-author of the study, including some cases involving costly specialty drugs. The exceptions “are very important because the effect on consumers is so negative,” she says. “The idea that you can’t access these low-cost drugs and pay less is incredibly frustrating.”
After the first generic version of Tecfidera launched in August of last year, the competition was fast and furious. Within a few months, 11 manufacturers were making the drug, driving the median monthly generic wholesale acquisition cost for the 240 milligram capsules down to about $900—a roughly 90% discount to the Tecfidera list price of $8,276, according to 46brooklyn.
Tecfidera sales stumbled. The brand-name product was Biogen’s top-selling drug in 2019, with about $4.4 billion in sales. The company sold about $1.5 billion worth of the drug in the first nine months of this year. Late last month, a federal appeals court rejected Biogen’s effort to revive a key patent on Tecfidera.
For many Medicare patients, it was as if the price war never happened. Despite their bargaining power, the largest Part D plans generally gave enrollees a worse deal on the drug than their smaller counterparts, the 46brooklyn study found. The largest plans tended to offer brand-name-only coverage, according to the study, whereas smaller plans were more likely to cover both the brand name and generic or only the generic. And looking at Part D plans’ lowest negotiated price for any version of the drug—brand or generic—the researchers found that large plans’ prices were often even higher than Tecfidera’s list price, whereas the smallest plans had some of the lowest negotiated prices.
“The largest plans have greater resources, sophistication and leverage” to offer consumers the lowest-cost options, 46brooklyn’s Ciaccia says, yet “we found it was the exact opposite of that.”
Four large companies—Humana /zigman2/quotes/203095337/composite HUM -1.26% , CVS /zigman2/quotes/209664499/composite CVS 0.0000% , Centene /zigman2/quotes/208900023/composite CNC +0.20% and Anthem /zigman2/quotes/203808743/composite ANTM +0.60% —offer Medicare plans with brand-name-only Tecfidera coverage, collectively covering more than 23 million people, according to 46brooklyn. Humana, CVS and Centene did not respond to requests for comment. Anthem referred questions to the Pharmaceutical Care Management Association, a trade group for pharmacy benefit managers, which handle prescription-drug benefits on behalf of Part D plans and other payers. That group said in a statement, “On behalf of patients, PBMs support achieving the lowest net price for prescription drugs, whether it is through use of a generic, an authorized generic, or a brand drug.”
In some cases, a single parent company owns a large health plan, a specialty pharmacy and a pharmacy benefit manager, creating potential conflicts of interest that may interfere with consumers getting the best price, researchers say. More transparency is needed “to understand how the dollars are flowing,” Dusetzina says. Where plans, PBMs, and pharmacies are all part of the same parent company, she says, “we’ve created a system that could keep rewarding itself by not negotiating as much as they can and not trying to get the best price for the Medicare program.”
Some provisions of the Build Back Better bill may help smooth out Part D’s quirks
Kristine Grow, a spokesperson for the health plan trade group AHIP, said the number of generic medications prescribed to seniors has climbed sharply since the introduction of Medicare Part D, “delivering significant savings to enrollees and taxpayers.” The problem, she said, is the drug prices set by the pharmaceutical industry. The 46brooklyn report, she says, “is based on a bogus premise.” PBMs pass rebates through to Medicare plans, “which use those savings to lower premiums and offset other health care costs for seniors,” she says.
But Michael Bagel, director of public policy for the Alliance of Community Health Plans, a trade group for nonprofit plans, says his group supports transparency requirements that would shine more light on price-setting issues. Many of the questions raised by the 46brooklyn report are “because of the lack of sunshine into the pricing process and into what discounts and rebates are being passed on,” he says.
Some provisions of the Build Back Better bill may help smooth out Part D quirks that can favor brands over generics, researchers say. The bill would eliminate the “coverage gap,” a phase of the Part D benefit in which manufacturers provide a 70% discount on brand-name drugs—but not generics. Those brand-name discounts count toward patients’ out-of-pocket spending, which can help them reach the more generous catastrophic coverage phase faster than they would with a generic. That can lead to some counterintuitive outcomes for patients. In the first three years of generic competition for the cancer drug Gleevec, for example, Medicare patients saw their out-of-pocket costs climb if they switched from the brand-name drug to the generic, according to a 2020 study by Dusetzina and her coauthors.
The bill would also increase Part D plans’ responsibility for costs in the catastrophic coverage phase to 60%, up from 15% today.
But much remains to be done, researchers say, to make the system more navigable for consumers who just want to find the most affordable way to fill their prescriptions. “This is a four-month research project that we did,” Ciaccia says of the Tecfidera study, “and we’re drug-pricing nerds. Grandma and grandpa aren’t going to figure this one out. It shouldn’t be this complex.”