Medicare has offered enrollees prescription drug coverage options through the Part D drug insurance program since 2006. However, contrary to popular belief, Medicare drug plans do not cover all FDA-approved medications.1 Over-the- counter medications as well as entire classes of prescription drugs (e.g. drugs for cosmetic hair growth or erectile dysfunction) are excluded from coverage under the Part D program. Of those medications that are eligible for coverage within the Medicare Part D prescription drug program, Medicare only requires two chemically distinct drugs per drug category to be covered.2
The two-drug per category minimum means, in theory, that many drugs may be uncovered by an individual Medicare drug plan. Uncovered drugs used by Medicare beneficiaries result in:
Given the ramifications of off-formulary drugs for Medicare beneficiaries, HealthPocket investigated coverage of the top 10 medications (as determined by U.S. dollar sales)4 across all 2014 stand-alone Medicare drug plans and Medicare Advantage plans with drug coverage. Using the lists of covered medications (known as formularies), HealthPocket found that most Medicare drug plan formularies covered the top 10 drugs. However, many of these drugs were associated with high out-of-pocket costs. Four of the top 10 drugs had average Medicare beneficiary cost-sharing in excess of $1,000 for a single prescription. HealthPocket observed that three of the top 5 most expensive drugs in the list were associated with the treatment of rheumatoid arthritis.5 The remaining two drugs were associated with the treatment of multiple sclerosis (copaxone) and cancer chemotherapy issues (neulasta).
Out-of-pocket costs in the Medicare drug plans can vary depending on the coverage period (deductible period, initial coverage period, gap coverage, catastrophic coverage). As mentioned earlier in the study, Medicare has a ‘catastrophic coverage’ program to protect Medicare beneficiaries from excessive out-of-pocket medication costs. Assuming a Medicare beneficiary’s drugs are on-formulary, catastrophic coverage begins after the beneficiary pays $4,550 in out-of-pocket costs within 2014. Once that spending threshold is met, Medicare will charge the beneficiary the greater amount of either 5% coinsurance fee of the drug cost or $6.35 for a brand name drug / $2.55 for a generic drug. To use an example from the most expensive drugs on the top 10 list, Copaxone would cost approximately $256 on average within catastrophic coverage.
HealthPocket also examined the prevalence of restrictions placed on the top 10 medications. These restrictions, sometimes referred to as cost utilization measures, include:
Used in the treatment of rheumatoid arthritis and other conditions, Remicade had the highest incidence of prior authorization requirement at 93%. Remicade belongs to a category of drugs known as biologics, which are genetically engineered proteins derived from human genes. Biologic treatments like Remicade are among the options that may be used for patients with severe rheumatoid arthritis who have not responded satisfactorily to other medications.6 Enbrel and Humira, which also treat rheumatoid arthritis, also had a very high incidence of the prior authorization requirements (92%).
At the other end of the spectrum, Crestor and Advair Diskus had low rates of prior authorization requirements at 1% and 6% respectively. The top 10 drugs averaged prior authorization requirements in 45% of the Medicare plan formularies. Among the drugs with out-of-pocket costs above $1,000, the average incidence of prior authorization requirements was 80%.
The requirement to demonstrate a less expensive or safer medication is unsatisfactory prior to the approval of another medication (step therapy) was observed less frequently than prior authorization. Four of the top 10 medications (Humira, Remicade, Neulasta, and Copaxone) had no Medicare formularies that required step therapy prior to the drug’s approval. Crestor, a drug that treats high cholesterol, had the highest incidence of step therapy requirements at 24%. Across all of the top 10 drugs, step therapy was required in less than 10% of the formularies that covered the drugs.
Quantity limits were very common for the top 10 prescription drugs. On average, the top 10 drugs had quantity limits in 51% of the Medicare formularies examined. Quantity limits may have clinical considerations. Overuse of a medication can lead to issues such as adverse side effects or dependence.
HealthPocket’s review of the Medicare coverage of the top 10 most popular drugs found that these drugs were included in the majority of Medicare drug formularies. Quantity limits and prior authorization requirements were often associated with the top 10 medications while step therapy was observed more rarely. High out-of-pocket costs, in excess of $100 per prescription, was observed for half of the top 10 drugs with four of the top 10 drugs exceeding $1,000 in out-of-pocket costs per prescription.
HealthPocket analyzed the drug formularies for all 2014 Medicare Part D prescription drug plans and 2014 Medicare Advantage plans that included prescription drug coverage. Drug formularies were obtained from the Centers for Medicare & Medicaid Services’ Prescription Drug Plan Formulary, Pharmacy Network, and Pricing Information Files. A single drug formulary could be shared by multiple Medicare drug plans. Percentages were based on statistics among the drug formularies. Data was not weighted by plan or plan market share.
The ranking of the top 10 prescription medications by Q3 2013 dollar sales was obtained from the Drugs.com web site. Drugs.com utilizes data from Micromedex, Cerner Multum, and Wolters Kluwer.
Cost sharing estimates was based on the average value for copayments or coinsurance fees within Medicare formularies. The use of a copayment or coinsurance fee for a given drug was based on whichever cost-sharing was more frequently used for the medication within the formularies.
Retail drug cost estimates were obtained from Costco.com and GoodRx.com on December 4, 2013. The form and quantity used for the estimates were as follows:
When price estimates were obtained from GoodRx.com, a CVS pharmacy in zip code 02144 was assumed.
Industry standard rounding procedures were used in this study.
Covered prescription drugs must also be used and sold within the United States in order to be eligible for Part D coverage.
Pub. 100-18 Medicare Prescription Drug Benefit Manual published by the Centers for Medicare & Medicare Services (CMS) was used as the authoritative source of Medicare drug benefit requirements and exclusions.
This survey analysis was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at email@example.com.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.
1 See section 20 “Part D Exclusions” within chapter 6 (Rev. 10, 02-19-10) of the Pub. 100-18 Medicare Prescription Drug Benefit Manual. Centers for Medicare & Medicare Services. September 26, 2008. http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter6.pdf. Last accessed November 11, 2013. Some state pharmaceutical assistance programs offer assistance with regard to Medicare Part D excluded drugs.
2 “Each category or class must include at least two drugs (unless only one drug is available for a particular category or class, or only two drugs are available but one drug is clinically superior to the other for a particular category or class), regardless of the classification system that is utilized. The two drug minimum requirement must be met through the provision of two chemically distinct drugs.” “30.2.1 - Formulary Categories and Classes” within chapter 6 (Rev. 10, 02-19-10) of the Pub. 100-18 Medicare Prescription Drug Benefit Manual. There are exceptions to the two drug minimum in cases where “unless only one drug is available for a particular category or class, or only two drugs are available but one drug is clinically superior to the other for a particular category or class.” Medicare also requires that all, or substantially all, of the drugs in the following 6 drug classes to be covered: Antidepressant medications, antipsychotic drug medications, anticonvulsant medications, antineoplastic drugs (used by cancer patients), immunosuppressant (used by transplant patients), and antiretroviral (used by patients with HIV).
3 The “catastrophic coverage” protection within the Medicare Part D program only applies to on-formulary medications for an enrollee within a Medicare drug plan. See “Understanding True Out-of-Pocket (TrOOP) Costs.” http://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/downloads/11223-P.pdf. Last accessed December 3, 2013.
4 http://www.drugs.com/stats/top100/sales. Last accessed December 3, 2013. Drug sales are for all of the U.S. regardless of Medicare enrollment.
5 Some medications treat multiple conditions.
6 “Biologics for Rheumatoid Arthritis Treatment” http://www.webmd.com/rheumatoid-arthritis/guide/biologics. Last accessed December 3, 2013.
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