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Brand name drugs jack up Medicare Part D co-pays by factor of 10, study shows

Findings point to opportunities to save money for Medicare Part D's elderly and disabled beneficiaries, who fill three or more prescriptions a month.

A new study takes a fresh measure of generic drugs' price advantages, revealing how much more Medicare Part D patients shelled out in copayments for two popular brand-name drugs in 2013.

The result: 10.5 times more.

Copayments averaged $42 for both Crestor, a cholesterol medication, and Nexium, taken for acid reflux, according to researchers whose study was published Wednesday in Health Affairs.

The consumers' cost for generic therapeutic equivalents was $4, they said.

The findings point to opportunities to save money for Medicare Part D's elderly and disabled beneficiaries, who fill three or more prescriptions a month on average, according to previous research cited in the study. Half of enrollees received less than $22,500 in income in 2012.

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High copays for brand-name drugs might lead patients "to choose between food or medications based on their monthly budget," the researchers said.

Generics represented 76 percent of the drugs dispensed in Medicare Part D in 2013, but brand names still retained preferential selection in some cases. One contributor is pharmaceutical companies' practice of negotiating rebates with private insurance companies that provide drug coverage plans to beneficiaries under Medicare Part D, researchers said. After getting a rebate, an insurer might list the rebated brand-name drug as "preferred," which encourages its selection over other brand medications.

Preferred drugs require lower copays than a rival branded drug, but they are still more expensive than a generic, according to Health Affairs. Physicians can prescribe generic medications if they choose to do so.

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Inaccurate information about the amounts of drug rebates also works to Medicare patients' disadvantage, researchers said.

Insurers at the start of each plan year must report the rebates they expect to get to the government, which takes them into account in setting the premiums that beneficiaries will pay and how much it will pay insurers for providing the benefit. Previous government investigations have found many insurers tend to overestimate their rebates, leading to beneficiaries paying excessive premiums and Medicare overpaying insurers. The government eventually recovers overpayments later when insurers report what they actually received in rebates.  But Medicare beneficiaries are left to absorb the cost of brand prescribing, copays and elevated premiums, researchers said.

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To do their study, researchers analyzed cost data for all medications in 2013 under Medicare Part D, a dataset released for the first time last year by the Centers for Medicare & Medicaid Services.

In 2013, the top 10 drugs in Part D, ranked by claims, were all generics, accounting for $4.1 billion in expenses. But ranked by total spending, the top 10 most expensive drugs were all brand names, representing $19.8 billion in spending, CMS said. Nexium was No. 1 -- at $2.5 billion -- and Crestor was No. 3 at $2.3 billion.

Had generic equivalents been prescribed in 2013 instead, the government, patients and insurance companies could have saved a combined $870 million for omeprazole in place of Nexium and $1.2 billion for atorvastatin instead of Crestor, researchers estimated. Dr. Nicole Gastala, the study's lead author, said certain aspects of medical culture steer patients toward brand-name drugs.

Patients are frequently biased toward brand names by the power of advertising, and doctors' interactions with pharmaceutical representatives have the same effect on them, said Gastala, who practices family medicine in Iowa and was a former visiting scholar at the Robert Graham Center for Policy Studies in Washington, D.C.

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The cost of a drug is often unknown to both patients and doctors and physicians may have no idea how expensive a copay is.  When doctors prescribe a brand-name, patients rarely second-guess the choice, Gastala said.

Doctors sometimes try to find workarounds to save their patients money.

Dr. Robert Wergin, the chair of the American Academy of Family Physicians, said when generic medications are unavailable in the same strengths as brand-name drugs, he sometimes adjusts the generic version's dosage to make it equivalent. He may tell patients to cut some generic pills in half to make them equivalent in strength to a brand-name medication, for example.

"I went to medical school, and I can't remember a class where we talked about business models and rebates and [the pharmaceutical industry]," Wergin said. "My focus is on the individual patient."

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Twitter: @HC_Finance

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