Specialty Generics Face Perverse Incentives In Medicare Part D

Whether specialty generics are cheaper to payers than their originator branded counterparts is partly a function of the level of rebates drugmakers are willing to offer to a pharmacy benefit manager (PBM) to secure preferred placement on the formulary. Originator firms can outmaneuver specialty generic makers by extending generous rebates to ensure preferred formulary placement. But, these rebates aren’t necessarily passed through to Medicare beneficiaries.

The catastrophic phase of the Part D benefit is where the beneficiary only has to pay 5% of the drug costs. It occurs after the patient’s OOP threshold, which in the 2020 plan year is $6,350. Described by 46Brooklyn researchers as a “race to catastrophic,” the catastrophic coverage phase is the metaphorical finish line, because it’s where the beneficiary’s cost-sharing is lowest. Read more here.

(Source Josh Cohen; Forbes; 1/4/21)