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Medicare could save $3.6 billion on generic drugs if program could match direct-to-consumer price

The researchers compared Medicare Part D generic drug prices with Mark Cuban Cost Plus Drug Company prices.

The Medicare program could realize significant savings on generic prescription drug costs if it could match the prices of the Mark Cuban Cost Plus Drug Company’s (MCCPDC) direct-to-consumer model, a new research paper shows.

At national scale prescription drug spending has risen sharply in recent decades, from $30 billion in 1980 to $335 billion in 2018. In 2019, the United States spent more than $1,000 per capita on prescription drugs, a higher level of spending than in other high-income countries.

The new research paper, which was published today by Annals of Internal Medicineis based on an analysis of 109 generic drugs sold by the MCCPDC in February 2022. The researchers found comparable prices in the Medicare Part D plan for 89 of the generic drugs, and they calculated the price differences for the maximum (90 units ) and the minimum (30 units). ) quantities available.

The research article presents several key data points.

  • Medicare’s estimated annual spending on the 89 targeted generic drugs was $9.6 billion.
  • If Medicare purchased generic drugs at the maximum quantities available from the MCCPDC, the program could have saved $3.6 billion on 77 of 89 generic drugs. This represented a cost saving of 37%.
  • If Medicare purchased generic drugs at the minimum available quantities from the MCCPDC, the program could have saved $1.7 billion on 42 of 89 generic drugs. This represented a cost saving of 18%.
  • The drug with the highest cost savings was esomeprazole with $293 million in savings.

“Our results suggest that Medicare overpays for many generic drugs, which is consistent with results that Medicare spent over 43% of generic prescriptions in 2018 compared to Costco member prices,” wrote the co-authors of the research paper.

In the United States, the system used to buy generic drugs is not profitable, wrote the co-authors of the research paper. “Generic drug competition is a major source of prescription drug savings in the United States, but the lower prices of a direct-to-consumer model highlight the inefficiencies of the existing system of distribution and generic drug reimbursement, which includes wholesalers, pharmacy benefit managers, pharmacies and insurers. By one estimate, this supply chain retains 64% of every dollar spent on generic drugs.”

The co-authors of the research paper offer a prescription for improving the cost-effectiveness of US generic drug spending. “While direct-to-consumer private companies like the MCCPDC may offer savings to some patients on some drugs, policy reforms that improve price transparency, increase competition for expensive generic drugs, prevent price increases annual fees and limiting pharmacy and dispensing costs could increase the affordability of essential generic drugs for all Americans.”

Christopher Cheney is the Clinical Care Editor at HealthLeaders.

Joan J. Dean

The author Joan J. Dean