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

Medicare Part D does not allow plans to exclude drugs in six protected classes from their formularies, which may limit plans' ability to negotiate rebates and lead to higher spending. We estimated the association between protected-class status, US-level estimated rebates, and formulary coverage during the period 2011-19. We found that protected classes indeed had significantly lower exclusion rates in Medicare Part D during this period relative to nonprotected classes, and this difference was larger than the corresponding difference in commercial plans. US-level average rebates grew 22.5 percentage points less in protected than in nonprotected classes during 2011-19, a period when formulary exclusions increased. Relative to nonprotected classes, US-level average rebates in protected classes were especially low among drugs with high Medicare market share. These results suggest that Medicare Part D protected-class policy may reduce rebates.