Medicare Part D Protected-Class Policy Is Associated With Lower Drug Rebates

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Public Health

Background:

• Medicare Part D plans face restrictions on excluding drugs from six protected classes.
• This limitation may hinder rebate negotiations and contribute to increased healthcare spending.

Purpose of the Study:

• To examine the association between protected-class status and formulary coverage and rebates in Medicare Part D from 2011-2019.
• To compare these trends with commercial insurance plans.

Main Methods:

• Analysis of US-level estimated rebates and formulary coverage data.
• Comparison of protected versus nonprotected drug classes within Medicare Part D and commercial plans.

Main Results:

• Protected classes exhibited significantly lower formulary exclusion rates in Medicare Part D compared to nonprotected classes.
• The difference in exclusion rates was more pronounced in Medicare Part D than in commercial plans.
• US-level average rebates grew less in protected classes (22.5 percentage points) than in nonprotected classes during 2011-2019.
• Rebates for protected-class drugs with high Medicare market share were particularly low compared to nonprotected classes.

Conclusions:

• The Medicare Part D protected-class policy appears to be associated with reduced rebate growth.
• This policy may limit the ability of plans to negotiate rebates, potentially impacting overall spending.