Donut Hole in Medicare Part D Triggers Generics Switch

May 23, 2007

A new study by Wolters Kluwer Health confirmed what many suspected would be the result of the Medicare Part D donut hole--beneficiaries switch to cheaper options and they don't switch back.

Medicare beneficiaries already use generics about 4 percent more often than people insured under commercial plans. And the findings suggest that this gap is likely to widen.

The analysis of Part D's first-year data may turn down the volume on the ongoing argument over how many people would fall into the coverage gap. According to Wolters Kluwer, the final total was 4.2 million, or 32 percent of "standard eligible" beneficiaries. These patients took an average of 3.5 medications.

"I didn't expect [the gap between brands and generics] to be this wide--and still widening in 2007," said Chris Messner, product director in Wolters Kluwer Health's healthcare analytics business. "Patients really picked and chose therapies based on financial constraints."

It's important to note that part of the increase in generic use was due to heavily used brands like Merck's Zocor (simvastatin) going off patent, Messner noted. But the switch was also driven directly by plan constraints. Of the policies offering donut-hole coverage last year, just a handful reimbursed both brand and generics drugs--and that enhanced coverage is even harder to come by this year.

Only 220 insurance plans, or 15.3 percent, reimbursed prescriptions of enrollees once they hit the $2,250 limit and fell into the gap; of these, 33 plans covered both brands and generics, according to an analysis from the Kaiser Family Foundation. This year, 538 plans (28.7 percent) are providing donut-hole coverage, but only 27 will cover brands as well as generics.

Meanwhile, first-quarter 2007 results confirm the trend, indicating that once a generic switch is made, consumers do not return to the branded drug.

When viewed by category, beta-blockers, thyroid hormones, and diabetes products were the most immune to the generics pull, Wolters Kluwer found. On the other hand, beneficiaries were most apt to abandon their brand-name anti-ulcerants and diuretics. Pharmaceutical companies have been responding to the prescription drop by providing vouchers and other rebates to beneficiaries hit by the donut hole.

On the whole, however, Medicare Part D has been driving drug use, not slowing it down. Of the 4.3 percent growth in prescriptions last year, 1.6 percent was attributable to the program. "From an overall perspective, the goal of Part D was to drive patients into preventative medicine--and I think it's really accomplishing that," Messner said.