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Generic Drug Utilization in the Medicare Part D Program (OEI-05-07-00130; 11/07) Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL
G
ENERIC
D
RUG
U
TILIZATION IN THE
M
EDICARE
P
ART
D

P
ROGRAM

Daniel R. Levinson

Inspector General November 2007

OEI-05-07-00130
Office of Inspector General http://oig.hhs.gov
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OCIG also represents OIG in the global settlement of cases arising under the Civil False
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community, and issues fraud alerts and other industry guidance. E X E C U T I V E S U M M A R Y

OBJECTIVE
To determine the extent of generic drug utilization in the Medicare
Part D program for the first two quarters of 2006.
BACKGROUND
Effective January 1, 2006, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 made qualified
prescription drug coverage under Medicare Part D (Part D) available to
all individuals entitled to benefits under Medicare Part A or enrolled in
Medicare Part B. Beneficiaries generally have the option to enroll in
either stand-alone prescription drug plans (PDP) or Medicare
Advantage prescription drug plans (MA-PD). Under Part D, plans have
broad discretion to design plan benefits and develop their drug
utilization management tools.
According to the Medicare Board of Trustees, Part D cost the Federal
Government $47 billion in 2006. The cost of the Part D prescription
drug program for 2006 was lower than the original estimate of
$59 billion, and future cost estimates have also been reduced, due in
part to greater than anticipated generic drug use. Generic drugs cost,
on average, 71 percent less than brand name drugs.
Generic drug use is determined by the frequency of generic drug
substitution at the pharmacy counter and the prescribing of drugs with
no generic drug equivalents. Therefore, in addition to calculating an
overall rate of generic drug utilization (i.e., the percentage of all
prescriptions that were for generic drugs), this study calculated the
following rates that contribute to the overall generic drug utilization
rate:
1. Generic drug substitution rate: the percentage of prescriptions
for multisource drugs (generic drugs and brand name drugs that
have a generic equivalent) that were dispensed as generics.
2. Single-source drug-prescribing rate: the percentage of all
prescriptions that were written for single-source drugs (drugs
that have no generic equivalent).
These indicators of generic drug utilization were calculated from
341 million prescriptions paid for by Part D plans from January through
June 2006.
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FINDINGS
Under Part D, generic drugs were dispensed 88 percent of the time
when generic substitutes were available.
The generic drug
substitution rate measures how often generic drugs were dispensed
when generic substitutes were available. For Part D, the overall generic
drug substitution rate of 88 percent is similar to the median generic
drug substitution rate of 89 percent for State Medicaid programs during
2004.
Generic drug substitution rates were similar across Part D plans,
between MA-PDs and PDPs, and across specific types of MA-PDs.
However, Part D plans generic drug substitution rates varied widely
within certain therapeutic classes (i.e., groups of drugs that treat the
same medical condition).
Under Part D, 37 percent of prescriptions were written for drugs that
have no generic substitutes.
Single-source drugs have no generic
substitutes. Therefore, the proportion of prescriptions that are written
for them (i.e., the single-source drug-prescribing rate) limits Part D
plans opportunities for generic drug utilization. For Part D, the overall
single-source drug-prescribing rate of 37 percent is similar to the
median single-source drug-prescribing rate of 41 percent for State
Medicaid programs during 2004.
Single-source drug-prescribing rates varied across Part D plans, ranging
from 14 percent to 59 percent. Single-source drug-prescribing rates
were similar between MA-PDs and PDPs but varied across specific
types of MA-PDs. Part D plans single-source drug-prescribing rates
also varied widely within certain therapeutic classes of drugs. For four
therapeutic classesantiulcer/gastrointestinal preparations,
cardiovascular preparations, lipotropics, and
pyschostimulants/antidepressantsplans single-source
drug-prescribing rates varied by more than 95 percentage points.
Under Part D, 56 percent of all drugs dispensed were generics.
The
generic drug utilization rate is the percentage of all prescriptions
dispensed that were generics. For Part D, the overall generic drug
utilization rate of 56 percent is similar to the median generic drug
utilization rate of 54 percent for State Medicaid programs during 2004.
Generic drug utilization rates varied across Part D plans, ranging from
37 percent to 83 percent. Generic drug utilization rates were similar
between MA-PDs and PDPs but varied across specific types of MA-PDs.
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ii E X E C U T I V E S U M M A R Y
Variation in the rate of single-source drug prescribing primarily
accounted for variation in generic drug utilization. Generic drug
utilization was highest in plans for which single-source drug prescribing
was lowest; conversely, generic drug utilization was lowest in plans for
which single-source drug prescribing was highest.
O E I - 0 5 - 0 7 - 0 0 1 3 0
CONCLUSION
Overall, Part D achieved a high level of generic drug use during the first
two quarters of calendar year 2006 that was similar to the level of
generic drug use achieved by State Medicaid programs in 2004.