Medicare Part D beneficiaries were much less likely to use lower-cost, authorized generic versions of highly expensive hepatitis C drugs Harvoni and Epclusa in 2019 and 2020 than Medicaid beneficiaries, driving up costs for Part D enrollees and the Medicare program, a government watchdog agency says in a new report.
The U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) attributed the difference in brand versus generic use primarily to the lack of inclusion of authorized generic versions of these drugs on the formularies of nearly half of Part D plans that covered the brand name version. More widespread coverage of brand name versions is due in part to the typically higher rebates paid by manufacturers to pharmacy benefit managers in exchange for favorable formulary placement of higher-cost drugs, the researchers say.
OIG released the report on Aug. 11. The watchdog recommends: “to reduce out-of-pocket costs for beneficiaries and combat rising drug spending in Medicare Part D”, the Centers for Medicare & Medicaid Services (CMS) should “encourage Part D plans to increase access to and use of the authorized generic versions of Epclusa and Harvoni, within the authorities granted under statute. We also recommend that CMS pursue additional strategies-such as educating providers and pharmacies-to increase access to and use of lower-cost hepatitis C drugs in Part D.”
To determine beneficiary utilization of brand name versus lower-cost hepatitis C drugs in Medicare compared to Medicaid and these drugs’ inclusion on formularies in Part D plans, OIG analyzed Part D and Medicaid claims data from 2019 and 2020 as well as CMS formulary data from 2020. Researchers then calculated cost impacts of the greater Part D utilization of higher-cost hepatitis C drugs that they found—with particular focus on Harvoni, Epclusa, and their authorized generic counterparts—for beneficiaries as well as the program itself.
Study authors defined higher-cost drugs as having list prices between $75,000 and $95,000 for one (typically 12-week) course of treatment, which included brand name Harvoni and Epclusa as well as two other drugs. A group of four lower-cost drugs—including authorized generics for Harvoni and Epclusa—all had list prices between $22,000 and $36,000 for the same quantity.
Plans’ preferential coverage of brand name drugs means higher costs for beneficiaries
Though Gilead launched its authorized generic versions of Harvoni and Epclusa in January 2019 and utilization of the cheaper versions increased throughout both that year and 2020 in Medicare and Medicaid, increases in use were much greater in Medicaid, the study found. Medicaid beneficiaries prescribed Harvoni, Epclusa, or their authorized generic counterparts were using the latter at double the rate of Medicare beneficiaries by the end of 2019. By the end of 2020, 77% of Medicaid beneficiaries were using authorized generics, compared to just 30% of Medicare beneficiaries. This contrasts with a generic utilization rate of 90% overall on drug products in the Medicare Part D program.
In 2020, nearly half of Part D plans covered brand name Harvoni or Epclusa but did not cover the authorized generic versions, the researchers found. When Gilead launched lower-cost versions of Harvoni and Epclusa in the beginning of 2019, Medicaid beneficiaries prescribed anti-viral hepatitis C drugs already used lower-cost ones such as Maryvet at much higher rates (78%) than Medicare beneficiaries (42%).
Higher Costs for Beneficiaries and Taxpayers
Medicare Part D beneficiaries who do not receive low-income subsidies (LIS) paid nearly 70% more in out-of-pocket costs for higher-cost hepatitis C drugs compared to lower-cost ones—$5,351 versus $3,130 on average for a course of treatment. The researchers note that since three quarters of Medicare beneficiaries using hepatitis C anti-virals receive Part D LIS and therefore pay nominal copays, greater utilization of higher-cost drugs means Medicare must pay greater cost sharing subsidies for these beneficiaries, which is ultimately picked up by taxpayers.
The high cost of hepatitis C treatment means that nearly all Part D beneficiaries using anti-viral drugs will enter the final or catastrophic phase of the benefit, during which Medicare covers 80% of a drug’s total cost. After rebates, Medicare paid $347 million in 2020 for higher-cost hepatitis C drugs prescribed in the catastrophic phase, compared to just $192 million for lower-cost ones, despite a similar number of beneficiaries reaching this coverage phase in each cost group, the study found.
Researchers attribute greater utilization of brand name Harvoni and Epclusa compared to their authorized generic versions in Medicare versus Medicaid to the absence of authorized generics from nearly half of Part D plan formularies that cover the brand name drugs.
In addition, the use of higher-cost drugs pushes beneficiaries into Part D’s catastrophic benefit phase sooner, which is cheaper for plans—their liability in this phase in just 15% compared to Medicare’s 80%. In the preceding initial and “coverage gap” benefit phases, plans must pay 75% of total cost, minus a 70% manufacturer discount applied to brand name drugs in the coverage phase. Reduced cost for plans in the catastrophic phase further incentivizes the use of more costly brand name drugs.
Hep C “blockbusters” and a transformed treatment landscape
When manufacturer Gilead introduced Harvoni in 2014, it was the first in a new class of anti-viral drugs hailed as game changers in the treatment of chronic hepatitis C, a virus causing liver infection and inflammation that can lead to complications and fatality over time. These drugs offered cure rates of close to 100%—a dramatic improvement over the only other potentially curative treatment available at that time, which required a much longer and more complex course of therapy while causing debilitating side effects.
Harvoni and its successors came with price tags in the tens of thousands of dollars, causing significant strain on public health insurance programs such as Medicare and Medicaid. Many state Medicaid plans and prison systems rationed these drugs by setting a high bar of illness severity to qualify for treatment. In 2017, drugmaker Abbvie released Maryvet, the first anti-viral hepatitis C drug with a lower price tag of around $26,000, compared to about $80,000 for similar brand name drugs.
In response to the release of Maryvet and other lower-priced brand name drugs, Gilead launched authorized generic versions of Harvoni and next-generation Epclusa in 2019, with similarly lower list prices and the “expressed goal” of making these drugs more affordable for patients, according to the OIG study. An authorized generic is an exact replica of a brand name drug sold by (or on behalf of) the same manufacturer with a different label, for the purpose of offering a lower-cost alternative while attempting to maintain market share.