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Generic or Name Brand? Prescriber Incentives and the Impact on Part D Spending

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ProPublica recently analyzed the prescribing habits of practitioners nationwide, and identified 913 doctors who disproportionately chose brand drugs over generics. In 2011, this group of doctors could have saved Medicare Part D $300 million by prescribing more like their peers, and the top prescriber alone could have saved the program $5 million. Within this group, 48% have received at least $1,000 since 2009 for promoting medications, compared with 15% among a sample of other practitioners.

Fueling such prescribing habits is the Low Income Subsidy (LIS), which charges qualified patients (more than 11 million in total) no more than $6.60 for brands and $2.65 for generics. Conversely, other Part D beneficiaries typically pay $40 to $85 for brands versus less than $5 for generics. Thus, doctors have less incentive to be cost-conscious when writing prescriptions for LIS beneficiaries. According to a MedPAC study, if LIS beneficiaries were prescribed generic drugs in the same proportion as other Part D beneficiaries, the program could save $1.3 billion a year in just seven drug categories. 

Revising the LIS’ copays, (i.e., lowering the copay for generics and increasing it for brands) would create incentives to shift to generics and generate savings for Part D. Also, the ProPublica authors believe that measures should be put in place to track prescribing habits and reward/punish prescribers based on cost-effectiveness. Finally, Medicare Part D can adopt practices already being used by organizations such as the Department of Veterans Affairs (VA), which requires additional approval for brand drug use when a suitable generic is available. In 2008, brand-name use among Part D beneficiaries was 2 to 3 times higher than that of the VA. Similarly, private insurance companies such as Kaiser Permanente and Southwest Medical Associates have promoted generics by increasing co-pays on brands and controlling which drugs doctors can prescribe. These cost-cutting measures do not require a sacrifice in care quality when suitable generics are available- at insurance companies with low brand-drug use, patients taking generics are still meeting and exceeding national success rates for lowering cholesterol and controlling diabetes. 



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