Medicare Part D Often Pays More Than Costco for Common Generic Drugs

(Reuters Health) – Prescription drug prices for many common generic medications are higher for Medicare Part D than for Costco, a new study suggests.

Researchers examined pricing data on the 200 most commonly prescribed drugs in 2017 for Medicare Part D, including the full price paid by Medicare as well as any out-of-pocket copayments or fees paid by patients. They did the same for Costco members, including all fees and taxes. After eliminating some medications with incomplete data, researchers compared 30-day and 90-day prices for 184 medications for both Medicare Part D and Costco in 2017 and 2018.

The main goals of the study were to determine how often there was what researchers described as a “counterfactual” cost paid by Medicare Part D that was higher than prices for Costco members and identify potential overspending by Medicare.

Compared with Costco prices, Medicare Part D overspent by 13.2% in 2017 and by 20.6% in 2018, the study team reports in JAMA Internal Medicine.

The total amount of overspending by Medicare Part D climbed from $1.7 billion in 2017 to $2.6 billion in 2018. Overspending was less pronounced (7.3%) for 30-day supplies of medications than for 90-day supplies (29.4%).

“Patient cost-sharing for generic drugs in Medicare Part D tends to be low, but this masks a system that is not currently set up to deliver value to the program overall,” said lead study author Erin Trish, associate director of the Schaeffer Center for Health Policy & Economics at the University of Southern California in Los Angeles.

While price competition is strong for these common generic drugs, Medicare Part D doesn’t appear to benefit from savings tied to competition as much as the intermediaries the program uses to manage drug benefits, Trish said by email.

“Our findings show that in systems like Costco’s, where incentives are set up to deliver value to the consumer, that’s what happens,” Trish said. “Fixing the incentives in the Part D system would help to make sure it is patients and taxpayers – and not intermediaries – who benefit from this competition.”

Relative to Costco, Medicare Part D overspent on 43.2% of all 30-day and 90-day supplies of the generic drugs examined in the study. Overspending was more common with 90-day supplies, occurring 52.9% of the time in 2018, compared with 35.7% of 30-day supplies.

One limitation of the study is that researchers didn’t account for the annual membership fees Costco charges people to shop at its stores, the authors note. Results from this analysis of generic medications also cannot be generalized to brand-name prescriptions.

Even so, the results of the current study are in line with results from a previous analysis comparing Medicare prices to those at Walmart, said Dr. Joseph Ross, a professor of medicine and public health at Yale University in New Haven, Connecticut, who wasn’t involved in the research.

“These findings are not surprising because we know that big box retailers like Costco and Walmart subsidize the cost of these generic medications, making them cheaper to their customers than they would be if obtained through their insurance plans,” Dr. Ross said by email. “It’s likely that the retailers do this in order to encourage customers to come to their stores more frequently.”

The current study results add to the evidence that it may sometimes be cheaper for patients to go to a retailer like Costco or Walmart than it is to fill prescriptions using their Medicare Part D drug coverage, Dr. Ross said.

“I think the take-home message for clinicians and patients is to be sure to shop around,” Dr. Ross said.

SOURCE: JAMA Internal Medicine, online July 6, 2021.

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