Even as total Medicare Part D spending grows, generic competition and copay variation have yielded a sustainable rate of per capita cost growth, according to federal Medicare researchers.
With the requirement to cover almost all drugs in six protected classes, Medicare drug plans early on turned to less expensive drugs and generics. That helped slow prescription price growth by half between 2007 and 2009, argue Steven Sheingold and Nguyen Xuan Nguyen, policy analysts at the HHS Office of the Assistant Secretary for Planning and Evaluation, in the CMS Medicare & Medicaid Research Review.
In a study of Part D price and utilization from 2007 to 2009 of drugs in all of the classes, Sheingold and Nguyen found that the shifts to generics in the first three years "significantly reduced" the growth the average cost per prescription, holding it at 4 percent, less than half of what some federal budget analysts were expecting.
Along with generics, Sheingold and Nguyen linked the lower growth rate with CMS's plan reimbursement structure and with the benefits management strategies plans have devised. They also found that less competitive drug classes with limited available generics and substitutions had larger increases than those in the more competitive classes with established and emerging generics.
As Part D was being set up in the early 2000s, the CBO had projected that public and private drug costs would increase at a rate of 9 percent average per capita after 2006.
With $60 billion in spending in 2009, the drug program's per capita growth ended up being around one to two percent during its first four years, below the average of 4 and 5 percent for public and private plan drug costs during that time.
The Medicare Payment Advisory Commission has also lent evidence to the debate. In a price index accounting for gegnerics, MedPAC recently found that Part D drugs grew cumulatively by 2 percent between 2006 and 2010, while the prices of individual drugs grew by 23 percent on average.
Medicare Part D's drug price index shows that the availability of generics is key to a sustainable cost curve, MedPAC argues.