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It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016

Appendix 1: Methods

Data collection, plans, and pharmacies

All data were collected from the Medicare Plan Finder, using zip code 21201 in Baltimore, MD, mostly between October 19 and November 13, 2015. Data were collected for 20 PDPs, all of which are offered by 10 firms that sponsor plans on a national or near-national basis. The one other PDP in the selected zip code was Magellan Rx Medicare Basic PDP, which is offered in 20 of 34 regions and is not considered a near-national plan. Medicare Advantage drug plans were excluded from the analysis because plan participation varies geographically and few plans are offered on a national or near-national basis.

We are able to use one zip code as a reasonable representation of PDP costs nationally because nearly 90 percent of PDPs are offered on a national or near-national basis. These PDPs use the same formulary and the same formulary tier structure in all regions. Some of the national and near-national PDPs have modest variations in cost-sharing amounts from region to region, and there may be modest variations in the full price of drugs across pharmacies and across regions. Although total out-of-pocket costs will vary modestly across regions, the overall patterns reported here should not vary by geography.

Data were collected for two different pharmacies in Baltimore: (1) Rite Aid pharmacy on Lexington Avenue, selected to represent a pharmacy with standard cost sharing for all 20 PDPs, and (2) Community Pharmacy, a Walgreens pharmacy on Howard Street, selected to represent a pharmacy with preferred cost sharing for 13 of 20 PDPs. Three of the other seven PDPs (SilverScript Choice, WellCare Classic, and WellCare Extra) do not use tiered pharmacy networks. The remaining four PDPs (Humana Preferred, Humana Walmart, Symphonix Prime Saver Rx, and Symphonix Value Rx) had no pharmacies with preferred cost sharing within the default mileage distance used on the Medicare Plan Finder for the selected zip code. Data were also collected for mail order, as shown on the Medicare Plan Finder. A selection of data were also collected from two community pharmacies (Best Care and Mt. Vernon pharmacies) to verify that prices were relatively similar across pharmacies.

Drug selection

A set of ten brand-name and ten generic drugs were selected using the Medicare Provider Utilization and Payment Data: Part D Prescriber Public Use File (PUF) for 2013, released by CMS in April 2015. Drugs were sorted by numbers of claims. We used the ten generic drugs with the most claims for 2013. Similarly, we used the ten brand drugs with the most claims for 2013, but including only those brand drugs that have not acquired generic competition since that date.1 None of the excluded brands had quantities that would have qualified them for the list of most-used generics. Because of changes in drug utilization and availability, the actual top drugs in 2015 may vary somewhat.

Specialty drugs were selected for four health conditions that are commonly treated by specialty drugs: hepatitis C, rheumatoid arthritis, multiple sclerosis, and cancer. For the latter three conditions, the specific drugs were selected based on usage levels in the 2013 Part D Prescriber PUF. Because key drugs to treat hepatitis C were not approved for the market in 2013, we selected the three drugs that are recognized as significant therapeutic options in 2015. Many cancer drugs and some treatments for other conditions are covered under Part B, rather than Part D; thus, our selection of drugs includes those that are commonly paid for under Part D.

For all drugs, the dosage and the form of drug and the quantity of the medication used per month were taken from the defaults offered by the Medicare Plan Finder.

Data elements on drug costs collected for each drug

For each drug, we collected information on the full cost (price), cost-sharing amounts paid by enrollees, tier placement, and utilization management restrictions. For specialty drugs, cost information is presented on an annual basis because the 12 studied drugs are priced high enough that out-of-pocket costs are determined based on all benefit phases. For brands and generics, cost information is presented on a monthly basis because prices are low enough that beneficiaries do not routinely reach the gap or catastrophic phases based on taking any one drug.

The full cost of the drug is shown on the Medicare Plan Finder. The amount shown if the drug is on formulary is based on the drug’s unit price and dispensing fee as submitted by the plan. For off-formulary drugs, prices are inserted by CMS using a standard formula to approximate cash pricing: the wholesale acquisition cost (WAC) plus 15 percent for brands and WAC plus 20 percent for generics. The WAC is a publicly available list price that approximates what retail pharmacies pay wholesalers for single source drugs and is taken by CMS from the Medispan database, with First Data Bank as a backup. When we characterize a typical drug price in this report, it is based on the median price for plans that include that drug on formulary. For the drugs in this analysis, the CMS-supplied price tends to be about 10 percent to 20 percent higher than the median price for plans with the drug on formulary. But for some drugs it is considerably higher, probably reflecting lags in the data used to update the WAC.

Cost sharing is shown on the Medicare Plan Finder for four phases of the Part D drug benefit. Cost sharing in the deductible phase (where applicable) is equal to the full cost of the drug. Cost sharing in the initial coverage phase is determined based on the tier placement and cost-sharing structure for the particular plan. Cost sharing in the coverage gap phase is based on a statutory formula that takes into account the statutory manufacturer’s discount for most brand drugs and a required coinsurance amount. Cost sharing in the catastrophic phase is based on a statutory rule: the greater of 5 percent of the full cost of the drug or a nominal copayment amount.

Tier placement is also shown on the Medicare Plan Finder for each drug, as is the use of utilization management restrictions, including prior authorization, step therapy, and quantity limits.

Profiles of hypothetical beneficiaries

Five drug profiles were created for this study to reflect different utilization patterns that combine brand and generic drugs at different levels of drug costs. We included only commonly used drugs in the profiles and assembled drug combinations that reflect commonly co-occurring health conditions. No specialty drugs were included in the profiles because most Part D enrollees do not use any specialty drugs and because those drugs were analyzed separately.

Total out-of-pocket costs for these hypothetical beneficiaries were collected from the Medicare Plan Finder as described above for the specialty, brand, and generic drugs. Total costs include plan premiums, deductibles where applicable, and the total cost-sharing amounts owed. They also include the full cost of any off-formulary drugs, based on the CMS-supplied full cost for that drug.

Appendix 2: Data Tables

Appendix Table 1: Costs in Medicare Part D Plans for 12 Specialty Tier Drugs, 10 Top Brand-Name Drugs, and 10 Top Generic Drugs, 2016
Drug Full drug costs Out-of-pocket drug costs
On formulary Off formulary On formulary
Lowest cost Median cost Highest cost Highest cost Lowest cost Median cost Highest cost
BRAND-NAME DRUGS Monthly costs Monthly costs
     Advair Diskus $309 $312 $318 $474 $31 $47 $154
     Crestor $216 $220 $225 N/A $29 $47 $56
     Januvia $330 $334 $343 $382 $29 $47 $86
     Lantus $248 $250 $255 $288 $29 $47 $115
     Lantus Solostar $372 $375 $382 $430 $29 $60 $172
     Lyrica $314 $320 $327 n/a $29 $76 $161
     Namenda $338 $345 $348 $392 $40 $142 $173
     Proair HFA $50 $51 $53 $59 $8 $13 $47
     Spiriva $943 $950 $979 $1,271 $33 $181 $472
     Synthroid $31 $32 $33 $38 $8 $29 $32
GENERIC DRUGS Monthly costs  Monthly costs
     Amlodipine Besylate $1 $4 $10 N/A $0 $3 $10
     Atorvastatin Calcium $4 $7 $20 N/A $0 $6 $20
     Furosemide $1 $3 $7 N/A $0 $3 $7
     Hydrocodone/APAP $94 $161 $184 $237 $16 $36 $78
     Levothyroxine Sodium $6 $13 $15 N/A $3 $8 $13
     Lisinopril $2 $3 $10 N/A $0 $3 $10
     Metformin Hcl $2 $4 $19 N/A $0 $4 $10
     Metoprolol Tartrate $2 $4 $19 N/A $0 $3 $10
     Omeprazole $2 $6 $10 $114 $0 $5 $10
     Simvastatin $1 $4 $10 N/A $0 $3 $10
SPECIALTY DRUGS Annual costs  Annual costs
     Sovaldi $83,614 $84,925 $86,690 N/A $6,547 $6,608 $6,704
     Harvoni $94,066 $95,541 $97,526 N/A $7,072 $7,153 $7,245
      Viekira Pak $82,936 $82,936 $82,936 $95,818 $6,516 $6,516 $6,516
     Avonex $63,974 $64,074 $64,946 $73,645 $5,664 $5,979 $6,033
     Copaxone $73,259 $73,922 $75,693 $84,337 $6,146 $6,448 $6,568
     Tecfidera $69,143 $69,393 $71,700 $79,886 $5,945 $6,235 $6,361
     Orencia $38,269 $38,407 $38,756 $44,218 $4,397 $4,413 $4,749
     Humira $41,277 $42,059 $42,808 N/A $4,572 $4,864 $4,943
     Enbrel $41,284 $41,499 $42,067 $48,298 $4,571 $4,872 $4,926
     Revlimid $174,370 $182,973 $186,781 N/A $11,084 $11,538 $11,881
     Gleevec $120,917 $122,804 $125,377 N/A $8,359 $8,503 $8,638
     Zytiga $95,521 $97,025 $99,047 N/A $7,164 $7,227 $7,326
NOTE: Analysis includes 20 national and near-national stand-alone prescription drug plans in Baltimore, MD (zip code 21201) and reflects pricing at a Rite Aid pharmacy in this zip code. ‘N/A’ is not applicable.

SOURCE: Georgetown/Kaiser Family Foundation analysis of 2016 Medicare Plan Finder data.

Appendix Table 2: Formulary Tier Placement and Utilization Management Restrictions in Medicare Part D Plans for 12 Specialty Tier Drugs, 10 Top Brand-Name Drugs, and 10 Top Generic Drugs, 2016
Drug Formulary tier placement Utilization management restrictions
Number of plans placing drug on: Number of plans requiring:
Generic or preferred generic Non-preferred generic Preferred brand Non-preferred brand Specialty Off formulary Prior authorization Quantity limits Step therapy
BRAND-NAME DRUGS
Advair Diskus 0 0 13 3 0 4 0 16 0
Crestor 0 0 20 0 0 0 0 19 0
Januvia 0 0 17 0 0 3 0 16 2
Lantus 0 0 16 1 0 3 0 0 1
Lantus Solostar 0 0 16 1 0 3 0 0 1
Lyrica 0 0 13 7 0 0 6 17 1
Namenda 0 0 6 9 0 5 13 7 0
Proair HFA 0 0 13 0 0 7 0 11 0
Spiriva 0 0 14 2 0 4 0 16 0
Synthroid 0 0 10 5 0 5 0 0 0
GENERIC DRUGS         
Amlodipine Besylate 17 3 0 0 0 0 0 4 0
Atorvastatin Calcium 7 12 0 1 0 0 0 16 1
Furosemide 20 0 0 0 0 0 0 0 0
Hydrocodone/APAP 0 2 7 1 0 10 0 10 1
Levothyroxine Sodium 14 6 0 0 0 0 0 0 0
Lisinopril 20 0 0 0 0 0 0 2 0
Metformin Hcl 20 0 0 0 0 0 0 11 0
Metoprolol Tartrate 20 0 0 0 0 0 0 0 0
Omeprazole 5 14 0 0 0 1 0 11 0
Simvastatin 17 3 0 0 0 0 0 15 0
SPECIALTY DRUGS
Sovaldi 0 0 0 0 20 0 20 15 0
Harvoni 0 0 0 0 20 0 20 15 0
Viekira Pak 0 0 0 0 2 18 2 2 0
Avonex 0 0 0 0 6 14 6 3 0
Copaxone 0 0 0 0 16 4 13 13 0
Tecfidera 0 0 0 0 8 12 8 6 1
Orencia 0 0 0 2 5 13 6 2 1
Humira 0 0 0 0 20 0 20 12 0
Enbrel 0 0 0 0 12 8 11 9 0
Revlimid 0 0 0 0 20 0 20 9 0
Gleevec 0 0 0 0 20 0 20 12 0
Zytiga 0 0 0 0 20 0 20 13 0
NOTE: Analysis includes 20 national and near-national stand-alone prescription drug plans in Baltimore, MD (zip code 21201).

SOURCE: Georgetown/Kaiser Family Foundation analysis of 2016 Medicare Plan Finder data.

Findings

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