It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016

Medicare Part D drug plans differ considerably in the drugs they list on their formularies, their use of formulary tiers, and the level and structure of cost sharing applied to those tiers. Plan premiums and the use of deductibles also vary widely. Plan decisions affect different beneficiaries in different ways, depending on the drugs they use. The financial consequences for Part D plan enrollees can be substantial. In this brief, we focus on out-of-pocket drug costs for Part D enrollees in 2016 for specialty, brand, and generic drugs.

The analysis is based on a selected set of specialty drugs and commonly prescribed brand and generic drugs. Out-of-pocket costs are taken from the Medicare Plan Finder, available at medicare.gov, as they apply to Part D enrollees who do not qualify for the Low-Income Subsidy. Drug costs were obtained for 20 prescription drug plans (PDPs) offered on a national or near-national basis, using a location in Baltimore, MD. In addition to examining costs for common drugs, we also examine profiles of multiple drugs for five hypothetical Part D enrollees. More details on the study methods can be found in Appendix 1: Methods.

Findings include:

• Part D enrollees can expect to pay thousands of dollars out of pocket for a single specialty drug in 2016, even after their drug costs exceed the catastrophic coverage threshold.
• Out-of-pocket costs are substantially higher—often ten times higher or more—for specialty drugs when they are not listed on formulary by a Part D plan.
• Out-of-pocket costs for specialty drugs tend to be similar across Part D plans when on formulary and are typically subject to prior authorization.
• Monthly out-of-pocket costs for commonly used brand and generic drugs tend to vary widely across Part D plans, even when included on plan formularies; for five of ten top brands, monthly costs vary by as much as $100 across plans.
• Out-of-pocket costs for commonly used brand and generic drugs are often significantly higher when they are off formulary than when they are on formulary; for six top brands and one top generic drug, costs are at least $200 more per month when off formulary than the median cost on formulary.
• Based on five hypothetical beneficiaries taking a mix of medications for multiple conditions, total out-of-pocket costs vary by as much as four-fold across Part D plans, taking into account the number and type of drugs they take, whether or not their drugs are on formulary, cost-sharing amounts, and monthly premiums.