In this study of a heterogeneous group of beneficiaries reflecting both Part D enrollees and non-enrollees alike, we found there was a secular trend of increased utilization of prescription of generic drugs over time for both Part D enrollees and non-enrollees. However, after adjusting for beneficiaries’ demographic characteristics, baseline prescription utilization and coverage, and baseline comorbid conditions, the growth rate of generic drug use was lower among Part D enrollees than among non-enrollees, suggesting that the net effect of Part D appeared to be a decreased use of generic drugs, although the effect size and direction varied across the drug classes examined.
These results may not be reflective of all Medicare beneficiaries, and we are not able to examine the degree to which generic uptake may have differed based on specific drug plans. However, our subjects reflect a broad sample of seniors that accounts for 15% of the market share of prescription drugs in the United States. In analyses comparing our subjects to those of a nationally representative sample, our subjects were more likely to be urban dwelling, but otherwise were similar to a nationally representative sample6
Our findings are important because little is known about the impact that Part D has had on prescription utilization, and it is unclear a priori whether or not Part D would lead to an aggregate increased or decreased rate of generic drug use. Prior work suggests that the overall impact of Part D was a modest increase in prescription utilization and decrease in out-of-pocket costs. However, we are not aware of prior peer-reviewed reports examining the impact of Part D on generic drug use. Our findings are noteworthy given that generic drugs represent an important means of cost savings8,9
. This is especially important given the burden of out-of-pocket costs for many Americans26
, associations between cost sharing and non-adherence27
, and concern about the impact of the Part D doughnut hole on processes and outcomes of care15,28
Our inquiry is also important because the impact of Part D on generic drug use has implications for the overall impact of the benefit on prescription expenditures. Substitution towards more expensive branded drugs would be expected to lead to greater total expenditures, and greater out-of-pocket expenditures to Medicare beneficiaries, relative to what the Part D benefit would have induced had no substitution occurred (i.e., if the Part D benefit increased utilization of generics and branded drugs in equal proportion). To the extent that the clinical benefits of generic and branded drugs are similar, then any substitution towards branded drugs (and additional costs associated with the substitution after taking into account rebates and discounts that plans may negotiate) is wasteful. As we highlight, although the odds of generic drug use only decreased slightly as a result of Part D, given the millions of prescriptions that were examined, there may be significant economic consequences for patients and third party payers.
In our primary analyses, we adopted a patient perspective by comparing Part D enrollees with non-enrollees. Although we adjusted for several subject characteristics (e.g., sex) that might confound the associations of interest, analyses that use matching of subjects based on baseline characteristics might also be helpful to explore the impact of Part D on generic drug use. Also, in addition to comparing enrollees with non-enrollees, we examined an alternative, societal perspective by comparing Part D enrollees and non-enrollees with near-elderly subjects not yet eligible for the prescription drug benefit. These analyses yielded similar results, although of modestly lower magnitude, with an overall statistically significant decreased likelihood of generic drug use due to Part D.
There are several potential reasons why our findings differ from prior reports that suggested higher rates of generic drug use associated with Part D enrollment13,14
. First, our study controlled for secular trends in generic drug use. There was a clear secular trend in increased use of generic drugs; however, our estimation suggested that such secular trend was not attributable to the institution of the Part D program. In addition, unlike those studies, we limited our analyses to a large, stable population of beneficiaries filling prescriptions for common chronic conditions during 2005 and 2006. This is important because studies that are not limited to a large stable population may erroneously attribute observed changes in rates of prescription use to changes among the users, rather than recognizing that the changes may be due to the populations being examined. In addition, while prior reports compared Part D enrollees with those with private third-party insurance, we compared Part D enrollees with the entirety of their non-enrollee counterparts within our sample.
Our findings have several limitations that lead to important yet unanswered questions. First, although we used subjects’ zip code-linked Census-level data and an out-of-pocket payout ratio to reflect the financial risk and generosity of drug plans, we were unable to identify subjects’ individual-level socioeconomic characteristics or details of their benefit design (e.g., premiums, copayments, PDP vs. MAPD plan), and thus we could not adjust for these variables in our analyses. Such information would be of interest since the benefit design of the drug plans often affects prescription drug consumption25
, and the impact of Part D enrollment on generic drug use may differ among subjects in PDPs vs. MAPDs. Future studies with greater details of patients’ economic resources and drug plans may identify the degree to which Part D has had a differential impact for subjects based on their socioeconomic strata, economic incentives such as benefit design, and enrollment in PDPs vs. MAPDs. Second, we do not have information regarding specific policies that may have been present in the pharmacy chain we examined, although we do not have any a priori reason to believe that the associations we describe would differ based on analyses of users of other pharmacy chains. Third, to maximize internal validity, our primary analyses were limited to subjects who filled at least one prescription within the pharmacy chain during both years of observation. Fourth, we did not have information regarding the negotiations that commonly take place between Part D plans and pharmaceutical manufacturers; these negotiations likely contribute to the patterns of prescription drug utilization that we describe.
In conclusion, few studies have been performed that examine the impact of the Medicare Part D Prescription Drug Benefit. Although the benefit has led to significant restructuring of pharmaceutical financing, as well as improved access for many beneficiaries, our results suggest that the institution of the Part D program led to a net decrease in the use of generic drugs among Part D enrollees compared to non-enrollees, suggesting substantial economic savings have been foregone. Future research on the economic impact of Part D should consider these opportunity costs.