Drug Price Variability Among Medicare PDP Plan – Part 1: Generics Overview

Written by Dr. Thomas Barus

June 20, 2020

Today, both pharmacies and consumers are concerned over drug pricing. In particular, generic drug pricing fluctuations can occur and may go unnoticed by the consumer, while pharmacies are reimbursed at differing rates. Based on the pharmacy a consumer shops, the pricing may differ, and in some cases significantly. In addition, pharmacies may be reimbursed largely different amounts based on the insurance plan the patient has chosen, while the drug acquisition costs remain the same for the pharmacy.

We analyzed drug pricing for the top 21 Medicare PDP Plan based on enrollment, for April 2020 using over 1,000 drugs, covered on the plan’s formulary, representing over 90%+ of Medicare utilization and costs. The prices were based on 9 types of pharmacies to get a good cross section of the marketplace, including: National Chain Pharmacies, Regional Chain , Grocery , Independent , and Mass Merchant pharmacies.

In Part 1 of this pricing series, we will be analyzing generic drugs covered by these Medicare PDP plans.

The charts below represent a visual depiction of the all drugs based on the drug’s average unit price per quantity (ex. 1 tablet), separated into 6 price bins for easier analysis. We used the following pricing buckets for the analysis: <$5/unit, <$10/unit, <$20/unit, <$200/unit,  <$600/unit, $600+/unit.

If you are unfamiliar with boxplots, here is how to interpret the charts below:

Generic Drug Analysis

All Plans & All Pharmacies

Total Drug Distribution by Avg Price Bin:

Total of 645 generic covered drugs.

We excluded Humana’s “floor priced” generics from our data set as it skews results.

 

Top 25 Drugs by cost Bin sorted by %Standard Deviation:

 

Top 25 Drugs by cost Bin sorted by Total Dollar Spread:

 

Findings:

As this data includes all PDP plans and all pharmacies, we expected some variability among drugs based on the current pricing strategies including MAC pricing lists, GERs, and Preferred Networks. We were surprised by many of the results, including the dollar spread and variation for different strengths of the same drug (ex.), acute care medications (ex. Amoxicillin, Levofloxacin),  short term use medications (ex Esomeprazole), and some protected class drugs.

Summary:

In part 1 of our pricing series, we reviewed the combined drug pricing across 21 Medicare PDP plans and 9 pharmacy types. The combined view provides some insight into price variation for the same drug, same time frame, and for same pharmacy set. There are many observations to take from this analysis depending on the pharmacy perspective you take.

In part 2 of our series, we will be diving deeper into insurance plan specific pricing variations among pharmacies. Part 2 Link

 


If you are interested in further statistics or details, please contact info@barusconsulting.com

The Full Data Pricing File is available here for purchase: Full Data Pricing File

Disclaimer: All images and data from this post must be referenced for use on any other site or for other purpose.

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