[Senate Report 113-306]
[From the U.S. Government Publishing Office]


113th Congress 		}			{	    Report
                                  SENATE                         
  2d Sessionn           }                       {           113-306
_______________________________________________________________________
 
MEDICARE PART D--PRESCRIPTION DRUG BENEFIT: INCREASING USE AND ACCESS

                       OF AFFORDABLE PRESCRIPTION DRUGS

                               __________

                             A  R E P O R T

                                 of the

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE




               December 11, 2014.--Ordered to be printed
               
   
                         U.S. GOVERNMENT PRINTING OFFICE 

49-010 PDF                     WASHINGTON : 2014 
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                       SPECIAL COMMITTEE ON AGING

                     BILL NELSON, Florida, Chairman
BOB CASEY, Pennsylvania              SUSAN COLLINS, Maine
CLAIRE McCASKILL, Missouri             Ranking Member
SHELDON WHITEHOUSE, Rhode Island     BOB CORKER, Tennessee
KIRSTEN GILLIBRAND, New York         ORRIN HATCH, Utah
JOE MANCHIN, West Virginia           MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut      DEAN HELLER, Nevada
TAMMY BALDWIN, Wisconsin             JEFF FLAKE, Arizona
JOE DONNELLY, Indiana                KELLY AYOTTE, New Hampshire
ELIZABETH WARREN, Massachusetts      TIM SCOTT, South Carolina
JOHN WALSH, Montana                  TED CRUZ, Texas
                       Kim Lipsky, Staff Director
            Priscilla Hanley, Ranking Member Staff Director
            
            
                         LETTER OF TRANSMITTAL

                              ----------                              

                                       U.S. Senate,
                                Special Committee on Aging,
                                 Washington, DC, December 11, 2014.
Hon. Joe Biden,
President, U.S. Senate,
Washington, DC.
    Dear Mr. President:  Under authority of Senate Resolution 
253 agreed to on October 3, 2013, I am submitting to you a 
report of the U.S. Senate Special Committee on Aging entitled: 
Medicare Part D Prescription Drug Benefit: Increasing Use and 
Access of Affordable Prescription Drugs.
    Senate Resolution 4, the Committee Systems Reorganization 
Amendments of 1977, authorizes the Special Committee on Aging 
``to conduct a continuing study of any and all matters 
pertaining to problems and opportunities of older people, 
including but not limited to, problems and opportunities of 
maintaining health, of assuring adequate income, of finding 
employment, of engaging in productive and rewarding activity, 
of securing proper housing and, when necessary, of obtaining 
care and assistance.'' Senate Resolution 4 also requires that 
the result of these studies and recommendations be reported to 
the Senate annually.
    I am pleased to transmit this report to you.
            Sincerely,
                                             Bill Nelson, Chairman.
                                             
                            C O N T E N T S

                              ----------                              
                                                                   Page
Executive Summary................................................     1
Objectives and Methodology.......................................     4
Background.......................................................     5
    Beneficiary Enrollment and the Low Income Subsidy Program....     5
    Generic Dispensing Rates.....................................     5
Plan Formularies.................................................     7
    Plan Sponsors' Prescription Drug Coverage Decisions..........     7
    Benefit Design...............................................     7
    Generic Drugs are Available in Plan Formularies..............    10
    Pharmacy & Therapeutics Committees May Not be Free of 
      Conflicts of Interest......................................    11
    Drug Manufacturers Rebates Are Different for LIS 
      Beneficiaries..............................................    12
Other Factors....................................................    13
    CMS Plan Finder Design.......................................    13
    Beneficiary Education........................................    15
    Physician Prescribing and Pharmacy Billing Practices.........    20
Conclusion.......................................................    25
Appendix 1--Committee Letter to HHS OIG..........................    26
Appendix 2--HHS OIG Response to Committee........................    27


113th Congress       }                          {            Report
                                 SENATE
 2d Session          }                          {           113-306

======================================================================
 
 MEDICARE PART D--PRESCRIPTION DRUG BENEFIT: INCREASING USE AND ACCESS 
                    OF AFFORDABLE PRESCRIPTION DRUGS

                                _______
                                

               December 11, 2014.--Ordered to be printed

                                _______
                                

    Mr. Nelson, from the Special Committee on Aging, submitted the 
    
                               following

                              R E P O R T

                              ----------                              


                           EXECUTIVE SUMMARY

    Since 2006, millions of Medicare beneficiaries have had 
access to outpatient prescription drugs through Medicare Part 
D, enacted as part of the Medicare Prescription Drug 
Improvement and Modernization Act of 2003.\1\ For the 2014 plan 
year, approximately, 40.7 million beneficiaries were enrolled 
in Medicare Part D.\2\ Under the program, private health 
insurance companies compete for beneficiaries by offering drug 
coverage plans at competitive prices. Although costs for the 
Part D program have been lower than originally projected,\3\ 
the program accounts for more than 10 percent of total Medicare 
costs. This report shines a spotlight on a significant factor 
that has checked growing costs in the program--beneficiaries' 
use of generic drugs--and explores ways to further increase the 
use of generic drugs.
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    \1\MedPAC, Report to the Congress: Medicare Payment Policy, March 
2013, p. 333 (online at http://www.MedPAC.gov/documents/
Mar13_entirereport.pdf).
    \2\The Boards of Trustees, Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds, 2014 Annual Report of the 
Boards of Trustees of the Federal Hospital Insurance and Federal 
Supplementary Medicare Insurance Trust Funds, p. 198.
    \3\Jack Hoadley, Medicare Part D Spending Trends: Understanding Key 
Drivers and the Role of Competition, Kaiser Family Foundation Issues 
Brief, May 2012, p. 1.
---------------------------------------------------------------------------
    In conducting our work, we requested information from the 
US Department of Health and Human Services Office of the 
Inspector General (HHS OIG), reviewed available past reports 
and scientific literature, and conducted interviews with 
relevant agencies and industry leaders.

Using generic drugs results in savings for taxpayers and beneficiaries

    As the number of generic manufacturers for any given drug 
in the market multiplies, price-competition among them 
increases, and the average price of the generic drug relative 
to that of the brand-name drug declines. On average, the retail 
price of a generic drug is 75 percent lower than the retail 
price of a brand-name drug.\4\ This competition translates into 
real savings for both taxpayers and beneficiaries. The 
Congressional Budget Office (CBO) estimated the use of generic 
drugs in the Part D program saved beneficiaries and taxpayers 
approximately $33 billion during 2007; approximately 72 percent 
($24 billion) of those savings accrued to the Medicare program 
and 28 percent ($9 billion) went to beneficiaries.\5\ CBO 
estimates that such savings are shared by beneficiaries and the 
Part D program through a combination of lower copayments and 
lower premiums than would have been charged otherwise.\6\
---------------------------------------------------------------------------
    \4\Congressional Budget Office, Effects of Using Generic Drugs on 
Medicare's Prescription Drug Spending, September 2010, p.1.
    \5\id at p.10.
    \6\id at p. 11 .
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    Generics have contributed to real-time, year-by-year 
savings to the Part D program and its participants. The 
Medicare Payment Advisory Commission (MedPAC) found that while 
prices of individual Part D prescription drugs grew by an 
average of 23 percent between 2006 and 2010, when accounting 
for generic substitution, Part D drug prices grew over the same 
time by an average of just 2 percent.\7\ Just as important, 
patients are more likely to stick with their prescription drug 
treatment plans if they are using lower-cost generics in place 
of brand-name drugs.\8\ And, patients who follow their 
treatment plans have better health outcomes because they can 
properly manage their conditions, reducing the incidence of 
hospital stays and emergency-department visits.\9\
---------------------------------------------------------------------------
    \7\MedPAC, March 2013, supra at p. 355.
    \8\Hoadley, J. F., Merrell, K., Hargrave, E., & Summer, L., In 
Medicare Part D Plans, Low or Zero Copays and Other Features to 
Encourage the Use of Generic Statins Work, Could Save Billions, Health 
Affairs 31, No. 10 (2012): 2266-2275, p. 2266.
    \9\id.
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Challenges that must be addressed to gain further savings

    Continuing to incentivize the use of generic drugs by Part 
D beneficiaries, when appropriate in their treatment plans, 
would boost cost-savings both to beneficiaries and taxpayers. 
When considering policy changes, it is important that greater 
incentives to use generic drugs do not make access to necessary 
brand-name drugs more difficult.
    The most recent Medicare trustees report found that generic 
drug use accounted for 84 percent of all Part D drug use during 
2013, up from 81 percent in 2012.\10\ Over the past seven 
years, Part D expenditures have increased by an annual rate of 
5.7 percent in the aggregate and only 0.5 percent on a per-
enrollee basis. These results reflect the rapid growth in 
enrollment since the Part D program began, a substantial 
increase in the proportion of prescriptions filled with low-
cost generic drugs, and patent expiration for some major drugs 
in 2012.\11\ While the proportion of generic drug use has 
increased over time, several factors should be addressed in 
order to further this trend. These include:
---------------------------------------------------------------------------
    \10\The Boards of Trustees, Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds, 2014 Annual Report of the 
Boards of Trustees of the Federal Hospital Insurance and Federal 
Supplementary Medicare Insurance Trust Funds, p. 150.
    \11\id. at p. 109.
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           Incentivizing and supporting plan sponsors 
        to not only include generic drugs on plan formularies, 
        but also to proactively promote the maximum use of 
        generic alternatives where appropriate. Currently, most 
        plan sponsors offer a full array of generic 
        alternatives, but they are not required to do so, 
        leaving a small number of plan formularies that do not 
        maximize generic offerings. In addition, there are no 
        mechanisms that reward or incentivize plan sponsors 
        that have undertaken successful strategies to further 
        increase generics use. Encouraging value in Part D 
        plans as much as possible will be increasingly 
        important in coming years.
           Finding ways to increase the adoption of 
        generic drugs among beneficiaries that receive Low 
        Income Subsidy (LIS) benefits. Generally, insurance 
        companies have been successful at encouraging enrollees 
        to use generic alternatives when available in part 
        because there are large differences in copays between 
        brand and generic drugs. However, in the LIS 
        population, these cost differences do not exist; their 
        copays are set by statute. Innovative methods to 
        improve use of generic drugs in this population, while 
        still ensuring full access for this vulnerable 
        population, must be explored.
           Improving education among beneficiaries and 
        health professionals. There continues to be a need to 
        educate beneficiaries and health professionals on the 
        efficacy of generic medications and incentivizing them 
        to substitute brand-name drugs for generic drugs, when 
        appropriate.
           Maximizing program integrity efforts at 
        pharmacies. In some situations, questionable pharmacy 
        billing practices could thwart efforts that have been 
        made to incentivize generics. HHS OIG, the Government 
        Accountability Office, and others have identified 
        important program controls in the Part D program that 
        could be improved.
    This report's focus is solely on those levers within the 
Part D program that can be adjusted to more effectively 
incentivize generics. The Committee heard from many 
stakeholders about additional factors outside the Part D 
program, such as the biologics exclusivity period, which will 
impact the overall availability of generic drugs, and the 
ability to substitute similar drugs. Further, issues within the 
generics market itself remain outstanding issues for 
policymakers. These include the continuing drug shortage crisis 
that most often affects generic drug supply and recent spikes 
in pricing for certain generic drugs. It is undeniable that 
there is now a lesser-known but growing and seemingly 
paradoxical phenomenon: certain older drugs, many of which are 
generic and not protected by patents or market exclusivity, 
have experienced dramatic price increases. The reasons behind 
recent price hikes warrant more study, as does continued 
vigilance regarding drug shortages. However, such factors are 
outside the scope of this report.
    It is the Committee's hope that this report can help 
Members of Congress and the health care community to develop 
and implement policies and practices that promote greater 
adherence and access to affordable, quality prescription drugs 
in the Part D program.

                       OBJECTIVES AND METHODOLOGY

    Under the Medicare Part D program, private health insurance 
companies compete for beneficiaries' business by offering drug 
coverage plans at competitive prices. While successful in many 
ways, the Part D program has grown significantly in size and 
complexity since the first year of open enrollment began. Along 
with the federal government's investment, beneficiaries also 
pay for the program through insurance premiums and copayments 
for the prescriptions they fill. Given the program's 
considerable price tag to Medicare ($69.7 billion during 2013) 
and beneficiaries, seeking responsible ways to continue to 
contain costs and ensuring that the program is as efficient as 
possible for beneficiaries are top priorities for the Aging 
Committee. One way to contain costs without jeopardizing access 
to needed care is to continue to look for ways to substitute 
brand-name drugs for generic drugs, when appropriate.
    Our review focused on identifying factors that impact Part 
D beneficiaries' use of generic drugs as well as developing 
strategies to further increase the use of generic drugs. Our 
analysis focused on two main areas:
          1. Plan formularies, including the availability of 
        generic drugs within the plans, benefit design, and 
        program tools used by plan sponsors; and
          2. Other factors--such as website design for CMS's 
        Plan Finder, beneficiary, physician, and pharmacy 
        preferences and practices--that could impact the 
        beneficiaries' use of generic drugs.
    We undertook a study of 2013 plan formularies to assess 
whether generic equivalents were widely and equally available 
among all beneficiaries (regardless of income status). Because 
beneficiaries in the Low Income Subsidy (LIS) population have a 
lower rate of generic drug use than in the rest of the 
population, we asked the Department of Health and Human 
Services Office of the Inspector General (HHS OIG) to analyze 
plan formularies and to offer potential explanations of factors 
that may contribute to lower generic drug use among this 
population. For the Committee's request, see Appendix 1 and for 
HHS OIG's response, see Appendix 2.
    We also conducted a comprehensive review of generic drug 
utilization and current program tools used by plan sponsors to 
incentivize generics use. We identified consumer perception and 
education, pharmacy billing, and physician prescribing as other 
factors that could impact the beneficiaries' use of generic 
drugs. To analyze these other factors and their impact on 
generic-drug use, we reviewed a comprehensive body of 
literature both from investigative sources including the HHS 
OIG and the Government Accountability Office (GAO), and from a 
broader review of scientific literature. Finally, we solicited 
comments from external stakeholders on strategies that 
incentivize lower-cost generic-drug use.

                               BACKGROUND


       BENEFICIARY ENROLLMENT AND THE LOW INCOME SUBSIDY PROGRAM

    When shopping for a Part D prescription drug plan, Medicare 
beneficiaries can choose between two kinds of plans:
          1. Stand-alone prescription drug plans (PDPs) provide 
        private drug coverage for Medicare beneficiaries with 
        traditional fee-for-service Medicare coverage.
          2. Medicare Advantage-prescription drug plans (MA-PD) 
        provide all the components of fee-for-service Medicare 
        coverage and prescription drug coverage under one 
        private plan.
    For the 2014 plan year, beneficiaries were able to choose 
from 1,169 nationwide PDPs and 1,615 MA-PDs.\12\ Of the more 
than 35 million Medicare beneficiaries who were enrolled in 
Medicare drug plans in 2014, about 64 percent were in PDPs and 
the rest were in MA-PD plans.\13\ Monthly premiums averaged 
about $30 across all plans.\14\
---------------------------------------------------------------------------
    \12\MedPAC, Report to Congress: Status Report on Part D, March 
2014, Chapter 14, p. 355 (online at http://www.medpac.gov/documents/
Mar14_entirereport.pdf).
    \13\id.
    \14\id.
---------------------------------------------------------------------------
    Approximately one-third of all enrollees (11 million) 
receive help through the Part D Low Income Subsidy (LIS) 
program to pay their drug plan premiums, copays, and 
deductibles.\15\ The Centers for Medicare and Medicaid Services 
(CMS) estimates that an additional two million low-income 
individuals are eligible for but are not receiving these 
subsidies. To qualify for the LIS, beneficiaries must meet an 
income and asset requirement; however, beneficiaries with very 
low incomes are automatically eligible.\16\ The amount of the 
subsidy (full or partial) is based on income level; 
beneficiaries below 100 percent of the federal poverty level 
receive a full subsidy, although a partial benefit is available 
for those beneficiaries between 100-150 percent of the federal 
poverty level.
---------------------------------------------------------------------------
    \15\Hoadley, J., Summer, L., Hargrave, E. & Cubanski, J., Medicare 
Part D Prescription Drug Plans: The Marketplace in 2013 and Key Trends, 
2006-2013, Kaiser Family Foundation Issues Brief, December 11, 2013 
(online at http://kff.org/medicare/issue-brief/medicare-part-d-
prescription-drug-plans-the-marketplace-in-2013-and-key-trends-2006-
2013/).
    \16\See Kaiser Family Foundation. Medicare Prescription Drug 
Benefit Fact Sheet, November 19, 2013 (online at http://kff.org/
medicare/fact-sheet/the-medicare-prescription-drug-benefit-fact-sheet/
). To qualify for the LIS, income must be less than 150 percent of the 
Federal poverty level ($17,235 for individuals during 2013), and assets 
must be less than $13,300 for an individual. Individuals can apply for 
the LIS program through Social Security Administration or Medicaid.
---------------------------------------------------------------------------
    Beneficiaries who are dually eligible for Medicaid and 
Medicare automatically qualify for the LIS program without 
having to complete a separate application. If they do not 
choose a plan on their own, Medicare automatically enrolls 
these individuals into a qualified PDP.\17\ If the beneficiary 
qualifies for a full subsidy and enrolls in a qualified plan, 
the LIS subsidy covers the premium. They are, however, still 
responsible for small copayments for each covered medication, 
ranging from $1.15 to $6.60.
---------------------------------------------------------------------------
    \17\Medicare automatically enrolls these beneficiaries into a 
``benchmark plan.'' A benchmark plan is a basic Medicare Part D plan 
that has a premium below the weighted average of Part D plan premiums 
in a region. This weighted average premium is determined each calendar 
year, and CMS announces plans that qualify.
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                        GENERIC DISPENSING RATES

    The generic dispensing rate has steadily increased in the 
Medicare Part D program, from 61 percent in 2007 to 81 percent 
in 2012.\18\ One reason for this is that the introduction of 
the Part D benefit coincided with patent expirations for many 
of the most commonly prescribed drugs, making generic options 
available. Although the share of prescriptions for generic 
drugs has increased for both LIS and non-LIS beneficiaries from 
2007 to 2011, as shown in the table below, LIS beneficiaries 
have had a consistently lower generic dispensing rate than non-
LIS beneficiaries.\19\
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    \18\MedPAC, A Data Book: Health Care Spending and the Medicare 
Program, June 2014, p. 173 (online at http://medpac.gov/documents/
publications/jun14databookentirereport
.pdf?sfvrsn=1).
    \19\MedPAC, June 2014, supra at p. 174

      TABLE 1: GENERIC DISPENSING RATE BY LIS STATUS, 2007-2011\20\
------------------------------------------------------------------------
                               2007     2008     2009     2010     2011
------------------------------------------------------------------------
LIS                             60%      65%      68%      71%      74%
Non-LIS                         62%      69%      72%      76%      79%
------------------------------------------------------------------------

    Even though generic utilization is high, overall numbers do 
not tell the whole story. MedPAC has cited the impact that 
high-cost beneficiaries--those enrollees whose spending reaches 
the catastrophic level--have on the overall spending of the 
program and the importance of generic substitution, where 
appropriate, in particular with this population. According to 
MedPAC's Part D Status Report, over 80 percent of beneficiaries 
with high drug spending received Part D's LIS.\21\
---------------------------------------------------------------------------
    \20\MedPAC, A Data Book: Health Care Spending and the Medicare 
Program, June 2014, p. 383 (online at http://www.medpac.gov/documents/
reports/mar14_ch14.pdf?sfvrsn=0).
    \21\MedPAC, March 2013, supra at p. 354-362.
---------------------------------------------------------------------------
    High-cost beneficiaries typically have more prescriptions 
filled and fewer generic substitutions than other 
beneficiaries. The 2012 MedPAC review of this issue offers a 
telling statistic: in 2009, high-cost beneficiaries filled an 
average of 111 prescriptions per year (about nine per month) at 
$110 per prescription, as compared with 41 prescriptions per 
year (about four per month) at $42 per prescription for non-
high cost beneficiaries.\22\ Although high-cost beneficiaries 
use many of the drugs commonly used by less-costly 
beneficiaries, they tend to use more brand-name drugs than 
other beneficiaries.
---------------------------------------------------------------------------
    \22\MedPAC, Report to the Congress: Medicare Payment Policy, March 
2012, p.354 (online at http://medpac.gov/documents/
mar12_entirereport.pdf).
---------------------------------------------------------------------------
    While some differences reflect health status, there is 
support in the literature for notable differences within 
therapeutic classes. Researchers looking at potential savings 
from generic substitution in diabetes drugs alone found that 
generic substitutions resulted in annual savings of $127 to 
$160 per beneficiary, and concluded that examining enhancements 
of generic substitution, where appropriate, could be a 
practical next step to lowering drug costs in Medicare.\23\ 
Such savings are still relevant when considering, for example, 
recent MedPAC findings that among diabetic therapies, brand-
name drugs accounted for 62 percent of the prescriptions for 
high cost enrollees, compared with just 33 percent of non-high-
cost enrollees.\24\ The report discusses how plan formularies 
and other factors impact the generic dispensing rate among the 
LIS and non-LIS populations.
---------------------------------------------------------------------------
    \23\Duru, O., et al., ``Potential Savings Associated with Drug 
Substitution in Medicare Part D: The Translating Research into Action 
for Diabetes (TRIAD) Study.'' Journal of General Internal Medicine: 
August 2013, p. 230.
    \24\MedPAC, Report to the Congress: Medicare Payment Policy, March 
2012, p.354 (online at http://medpac.gov/documents/
mar12_entirereport.pdf).
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                            PLAN FORMULARIES


          PLAN SPONSORS' PRESCRIPTION DRUG COVERAGE DECISIONS

    Plan formularies--the list of prescription drugs that are 
covered by a specific health care plan--are one of the most 
important considerations for Medicare beneficiaries in choosing 
a Part D plan. Federal law requires that plan sponsors use 
Pharmacy and Therapeutics (P&T) committees to make prescription 
drug coverage decisions. The committees are made up of 
physicians, pharmacists, nurses, administrators, quality-
improvement managers, and other health care professionals and 
can vary in size; HHS OIG found that in 2010, committees ranged 
from 3 to 62 members, with an average size of 16 members. These 
committees evaluate drugs based on the scientific and economic 
considerations and aim to develop formularies that achieve 
appropriate and safe drug therapy. There is no statutory 
requirement that P&T committees consider or include generic 
drugs in their plan formularies; however, they are required to 
review practices and policies that affect access, including the 
availability of generic substitutions.\25\
---------------------------------------------------------------------------
    \25\CMS, Medicare Prescription Drug Benefit Manual (``Medicare 
Prescription Drug Benefit Manual''), (Pub-100-18), Part 6 Sec.  30.1.5 
(online at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovContra/Downloads/Chapter6.pdf).
---------------------------------------------------------------------------
    Plan sponsors do not need to develop a different formulary 
for each of their plan offerings. In fact, OIG estimates there 
are about 3,300 unique Part D drug plans, but there are roughly 
only 302 CMS-approved Part D formularies.\26\ After a plan 
sponsor's P&T committee chooses a formulary, it must obtain 
CMS's approval before it can be implemented. In reviewing 
formularies, CMS works to ensure that beneficiaries have a 
range of Part D drug choices;\27\ however, it does not 
explicitly review formularies for their inclusion (or 
exclusion) of generics.\28\
---------------------------------------------------------------------------
    \26\Appendix 2, OIG response to the Senate Special Committee on 
Aging.
    \27\Gaps in Oversight of Conflicts of Interest, supra at p. 8 
(``CMS reviews and approves the formularies designed by P&T committees. 
CMS's review focuses on ensuring that formularies provide access to a 
range of Part D drug choices. CMS checks the formularies to make sure 
they meet accepted pharmaceutical standards and include drugs from 
different therapeutic categories. CMS generally does not review 
formularies for individual drugs. However, it does review individual 
drugs identified to treat some specific diseases and drugs in classes 
of clinical concern.'').
    \28\Aging Committee Staff Conference Call with CMS, Sept. 5, 2013.
---------------------------------------------------------------------------
    Plan sponsors incentivize beneficiaries to use generic 
drugs through how they have designed their plans, including 
copay and formulary structures. Medicare drug plans must meet 
defined requirements, but vary significantly in terms of 
premiums, benefit design, gap coverage, formularies, and 
utilization management rules.

                             BENEFIT DESIGN

    Plan sponsors have incentivized generic drug use with 
existing cost-sharing and formulary structures, as well as with 
utilization management programs. In 2014, about three-fourths 
of all plans (76 percent PDPs and 75 percent of MA-PD plans) 
used five cost-sharing tiers: preferred and non-preferred tiers 
for generic drugs, preferred and non-preferred tiers for brand 
drugs, and a tier for specialty drugs.\29\ About 62 percent of 
Part D enrollees are in PDP plans, and the remaining 38 percent 
are in MA-PD plans, with considerable variation across 
states.\30\ For the first time in the coming plan year, all 
stand-alone prescription drug plans will use tiered cost 
sharing.\31\ The use of tiering is significant. The tier-
pricing plan design incentivizes beneficiaries to use lower-
cost generic options, which helps to offset rising brand-name 
specialty drugs' costs (and thus overall plan costs) and keep 
premium growth low. However with most plans charging 
coinsurance, rather than a flat copayment amount for the 
highest cost drugs, this growing trend also raises concerns 
about beneficiary access to the highest cost or sole source 
drugs, where generic options may not be available.
---------------------------------------------------------------------------
    \29\Hoadley, J., Summer, L., Hargrave, E., Cubanski, J., & Neuman, 
T. Medicare Part D in Its Ninth Year: The 2014 Marketplace and Key 
Trends, 2006-2014. August 18, 2014.
    \30\Id.
    \31\Hoadley J., Cubanski, J., Hargrave, E., & Summer, L. Medicare 
Part D: A First Look at Plan Offerings in 2015. October 10, 2014.
---------------------------------------------------------------------------
    In addition to tiering, PDPs have applied ``utilization 
management'' restrictions since 2007 to an increasing share of 
on-formulary brand-name drugs. MA-PDs apply similar techniques, 
but generally to a smaller share of drugs. This means that even 
if a drug is listed on a plan's formulary, utilization 
management rules may be required--including step therapy, prior 
authorization and quantity limits. The presence of such rules 
increased from 18 percent of drugs in 2007 to 35 percent in 
2013, the latest year for which such data is available.\32\ In 
2013, across all PDPs, on average:
---------------------------------------------------------------------------
    \32\id.
---------------------------------------------------------------------------
         One percent required step therapy (requiring 
        the beneficiary to use a comparable, less costly 
        alternative first);
         18 percent of drugs had quantity limits (for 
        example, limiting a prescription to 30 pills for 30 
        days); and
         21 percent required prior authorization.\33\
---------------------------------------------------------------------------
    \33\id.
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    Plan sponsors are likely to use tiering and utilization 
strategies in tandem to incentivize beneficiaries to use 
generic drugs and to control overall costs. For example, Prime 
Therapeutics, a benefit pharmacy manager, found that for every 
1 percent increase in generic dispensing rates, a 1.5 percent--
or more--average savings on drug spending can be expected 
without impacting care and in many cases improving overall 
health status through adherence.\34\
---------------------------------------------------------------------------
    \34\Prime Therapeutic's estimated savings is particularly relevant 
because unlike many pharmacy benefit managers, the company is 
collectively owned by thirteen not-for-profit Blue Cross and Blue 
Shield Plans and can assess drug spending holistically on an ongoing 
basis as part of a beneficiary's overall health status.
---------------------------------------------------------------------------

Differences with LIS recipients

    Although plan sponsors have been successful in structuring 
plans that incentivize generic drug use among the general 
population, they cannot use the same strategy of tiered-benefit 
structures to provide similar cost-incentives for the LIS 
population. For about 80 percent all LIS beneficiaries, drug 
copays are nominal, and for a smaller number of LIS 
beneficiaries, their copays are roughly 15 percent of the drug 
cost.\35\ As shown in Table 2, LIS beneficiaries have a 
collapsed tiering structure, meaning they are responsible for 
copay amounts set by statute.
---------------------------------------------------------------------------
    \35\MedPAC, March 2013.

          TABLE 2: COPAY AMOUNTS FOR LIS BENEFICIARIES DURING 2013 FOR GENERIC AND BRAND-NAME DRUGS\36\
----------------------------------------------------------------------------------------------------------------
                                                                Generic & Multisource      Non-Preferred Brand
                                                                   Preferred Drugs                Name
----------------------------------------------------------------------------------------------------------------
LIS beneficiaries at or below 100 percent of the Federal                        $1.15                     $3.50
 Poverty guidelines.........................................
LIS beneficiaries over 100 percent of the Federal Poverty                       $2.65                     $6.60
 guidelines.................................................
----------------------------------------------------------------------------------------------------------------

    Medicare sets fixed limits on the copay amounts for LIS 
beneficiaries and pays the plan sponsor for the difference 
between the copay amount and the cost under the plan. Lower 
copays have been cited as one possible explanation as to why 
there is higher usage of brand-name drugs (and lower generic 
dispensing rates) in the LIS population.\37\
---------------------------------------------------------------------------
    \36\In 2014, the federal poverty level for a household of 1 person 
is equal to $11,670. (online at http://aspe.hhs.gov/poverty/
14poverty.cfm).
    \37\Appendix 2, OIG response to the Special Committee on Aging.
---------------------------------------------------------------------------
    The LIS population continues to be the largest single share 
of Part D costs.\38\ The lack of flexibility that plan sponsors 
have in benefit design for LIS beneficiaries has been a focus 
in recent years as policymakers have continued to look for 
avenues to keep overall spending low. MedPAC,\39\ the 
Bipartisan Policy Center,\40\ and the President's most recent 
budget\41\ have suggested that lowering or eliminating copays 
for generic drugs for LIS beneficiaries has the potential to 
reduce program spending in the future without substantially 
affecting access to needed medications. Researchers estimated 
savings of roughly $1 billion annually per 10 percent increase 
in the use of generic statins.\42\ In one study, researchers 
found that a low copayment for generic drugs was the strongest 
factor influencing the use of these drugs, and eliminating the 
copay has an especially large effect.\43\
---------------------------------------------------------------------------
    \38\MedPAC, March 2012, supra at p. 353.
    \39\id at p. 355.
    \40\Bipartisan Policy Center: A Bipartisan Rx for Patient-Centered 
Care and System-wide Cost Containment. April, 2013, p. 64.
    \41\Office of Management and Budget. Budget of the U.S. Government, 
2014, p. 39-40, 100. (online at http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2014/assets/budget.pdf).
    \42\id.
    \43\Hoadley, J. F., Merrell, K., Hargrave, E., & Summer, L., In 
Medicare Part D Plans, Low Or Zero Copays And Other Features To 
Encourage The Use Of Generic Statins Work, Could Save Billions, supra.
---------------------------------------------------------------------------
    The Committee heard concerns that increasing copays for LIS 
beneficiaries for brand-name drugs might affect access for this 
particularly vulnerable population. Many of these 
beneficiaries' health statuses are such that if a beneficiary 
is on multiple drugs in any month, the costs could add up to be 
burdensome. Furthermore, generic substitutions may not be 
universally effective in all situations, depending on the 
complexity of the beneficiary's health conditions.
    In the event that copays are changed, LIS beneficiaries are 
permitted to file an appeal with their plan when a brand-name 
prescription is needed. However, the appeals system is 
extremely complex, time-consuming, and in its current state, 
could make it very challenging for beneficiaries to obtain 
access to needed drugs. MedPAC stated in its recent review of 
the Part D appeals process, ``The data that were available to 
us were insufficient to make a comprehensive assessment of the 
plans'' administration of the process . . . and suggest the 
need for greater transparency and streamlining.''\44\
---------------------------------------------------------------------------
    \44\MedPAC, March 2014, supra at p. 368.
---------------------------------------------------------------------------
    What limited information is available on Part D exceptions 
and appeals is not reassuring. The agency's 2012 audit suggests 
that Part D plans struggle most with managing coverage 
determinations, appeals, and grievances.\45\ Additionally, 2011 
data released by CMS finds that over half (54 percent) of plan-
level denials are overturned by the Independent Review Entity 
(IRE).\46\ This rate of reversals by the IRE, coupled with the 
agency's own audit data on plans, raises serious questions 
about how well the redetermination and appeals process is 
working. Finally, beneficiary notification of non-coverage is a 
significant problem particularly for enrollees who are dually 
eligible for both Medicaid and Medicare, the majority of the 
LIS population.
---------------------------------------------------------------------------
    \45\Sokolovsky, J., Suzuki, S. & Metayer, L., ``Part D Exceptions 
and Appeals,'' (Presentation to MedPAC: September 2013, available at 
http://www.medpac.gov/transcripts/
part%20d%20exceptions%20&%20appeals.pdf).
    \46\Excludes cases that were dismissed, withdrawn or remanded and 
cases involving non-Part D drugs, see: Centers for Medicare and 
Medicaid Services, ``Part D Fact Sheets CY 2011'' (available at http://
www.cms.gov/Medicare/Appeals-and-Grievances/MedPrescriptDrugApplGriev/
Reconsiderations.html).
---------------------------------------------------------------------------
    Complicating the appeals process further, the Part D 
marketplace for LIS enrollees has been inconsistent, with only 
15 plans qualifying as benchmark plans in every year from 2006 
to the present.\47\ This means that this population, for the 
most part, is subject to continual auto-reassignment to new 
plans. This volatility would need to be taken into account with 
any co-pay increases or implementation of utilization 
management tools, like prior authorization; vulnerable 
beneficiaries subjected to constant re-review, without a 
streamlined and integrated process in place perhaps even 
between plans, could easily result in delays for needed 
medications.
---------------------------------------------------------------------------
    \47\Hoadley, J., Summer, L., Hargrave, E. & Cubanski, J., December 
11, 2013, supra.
---------------------------------------------------------------------------

            GENERIC DRUGS ARE AVAILABLE IN PLAN FORMULARIES

    At the Committee's request, HHS OIG reviewed all 2013 Part 
D plans to determine the availability of generic drugs in plan 
formularies.\48\ Because the generic dispensing rate for the 
LIS population is lower than it is for the non-LIS population, 
the HHS OIG review was conducted to determine the availability 
of generic drugs in plan formularies to provide a baseline for 
our review. HHS OIG found that generic drugs are widely 
available throughout all Part D plans, including benchmark 
plans that the LIS population commonly uses. A benchmark plan 
is a plan that is at or below the amount that the federal 
government's low-income subsidy will pay for a Part D plan 
premium.
---------------------------------------------------------------------------
    \48\For the Committee's request, see Appendix 1. For HHS OIG's 
response, see Appendix 2.
---------------------------------------------------------------------------
    In fact, the HHS OIG review found that Part D benchmark 
plans have a higher percentage of generic drugs available than 
plans above the regional benchmarks. This is significant 
because unless a beneficiary opts out, CMS automatically 
enrolls LIS beneficiaries in a benchmark plan. If an LIS 
beneficiary chooses a non-benchmark plan, he or she is 
responsible for the difference in premiums. Consequently, 
benchmark plans serve a higher proportion of LIS beneficiaries; 
according to the HHS OIG's review, 69 percent of all LIS 
beneficiaries are in a benchmark plan.
    The average percentage of generic drugs included in 
benchmark plans was 61 percent, compared to 58 percent for 
plans above the benchmark. Therefore, the lower generic 
dispensing rate among the LIS-population is not due to 
unavailability of generic drugs. Thus, to explain the 
difference in generic dispensing rates, other factors may 
explain why generic drug use by LIS beneficiaries has been 
lower than non-LIS beneficiaries, such as beneficiary copays 
and preferences, the prescribing behavior of health care 
providers, and pharmacy dispensing practices. These factors are 
discussed later in this report.
    HHS OIG also reviewed formularies for generic substitution 
potential. Generic substitution potential measures the ability 
within a formulary to substitute a brand-name drug for a 
generic drug. The HHS OIG review found that the potential for 
generic-drug substitution was the same or higher in benchmark 
plans than in plans above the regional benchmark. The average 
generic-substitution potential for benchmark plans was 87 
percent, compared to 83 percent for the other plans.
    As with larger MedPAC drug utilization trends among 
enrollees, a review of seventeen specific randomly picked drugs 
that had much lower generic dispensing rates for LIS 
beneficiaries than for non-LIS beneficiaries provides needed 
context to these findings. For the seventeen drugs reviewed by 
the HHS OIG for which LIS beneficiaries had substantially lower 
rates of generic substitution, most, but not all, of the 
formularies covered generic equivalents for the drugs reviewed. 
Out of the seventeen drugs reviewed, seven of the drugs did not 
universally have a generic equivalent available on all Part D 
formularies. The number of formularies that covered only a 
brand-name of one or more of the seven drugs was very small, 
ranging between one and eight formularies, depending on the 
drug at issue. Of those formularies that did not include a 
generic alternative for one or more of the seven drugs, most 
served Part D plans with premiums both above and below the 
regional benchmark.
    Therefore, while formularies overwhelmingly support maximum 
use of generics, in certain cases, the OIG review did show that 
a generic alternative was available on the market, but not on 
the formulary. Evidence appears to show that such cases are in 
the minority, but it remains unclear from the OIG's data as to 
where such formularies operate, what the beneficiary enrollment 
characteristics are, or any other enrollment specifics. It is 
also unclear where the brand name drug is placed (what tier) on 
the formularies without a generic option, or whether drugs with 
high brand name utilization were connected to cases of where 
there may be potential conflicts of interest between 
pharmaceutical companies and P&T committees, as found in 
another HHS OIG review and discussed later in this report. Even 
though the formularies without a generic alternative for highly 
prescribed drugs are very small, such questions offer potential 
additional areas worth exploring.

  PHARMACY & THERAPEUTICS COMMITTEES MAY NOT BE FREE OF CONFLICTS OF 
                                INTEREST

    One federal requirement is that at least two members on 
each P&T committee must be free of conflicts of interest from 
the sponsor or pharmaceutical companies.\49\ This requirement 
is designed to ensure that committees make independent and 
sound decisions about which drugs should be covered by sponsors 
and under what conditions. However, a report issued by HHS OIG 
in March 2013 found that sponsors conduct little oversight of 
potential conflicts of interest. HHS OIG reported that:
---------------------------------------------------------------------------
    \49\Medicare Prescription Drug Benefit Manual, supra at Part 6 
Sec. 30.1.1.
---------------------------------------------------------------------------
           Most sponsors' P&T committees have limited 
        definitions of conflicts of interest, which could 
        prevent them from identifying conflicts.\50\
---------------------------------------------------------------------------
    \50\HHS OIG, Gaps in Oversight of Conflicts of Interest, supra at 
p. 13.
---------------------------------------------------------------------------
           Many P&T committees allow their members to 
        determine their own conflicts, potentially enabling 
        conflicted members to join and remain on P&T 
        committees.\51\
---------------------------------------------------------------------------
    \51\HHS OIG, Gaps in Oversight of Conflicts of Interest, supra at 
p. 15.
---------------------------------------------------------------------------
           CMS does not adequately oversee sponsors' 
        compliance with the requirement that at least two 
        members on each P&T committee be independent and free 
        of conflict relative to the sponsor and pharmaceutical 
        manufacturers.\52\
---------------------------------------------------------------------------
    \52\OIG, Gaps in Oversight of Conflicts of Interest, supra at p. 
16.
---------------------------------------------------------------------------
    HHS OIG recommended that CMS establish minimum standards 
requiring sponsors to ensure that an objective process is used 
to determine whether disclosed financial interests are 
conflicts, instead of continuing to allow P&T members to review 
their own conflicts.\53\ To ensure that formulary decisions are 
based only on scientific evidence and standards of practice, 
HHS OIG also recommended that CMS oversee conflict-of-interest 
procedures implemented by plan sponsors.\54\
---------------------------------------------------------------------------
    \53\OIG, Gaps in Oversight of Conflicts of Interest, supra at p. 
19.
    \54\OIG, Gaps in Oversight of Conflicts of Interest, supra at p. 
21.
---------------------------------------------------------------------------
    CMS proposed a rule in early 2014 containing a provision 
that would require P&T committees to clearly articulate and 
document processes used to determine that conflict-of-interest 
requirements have been met. The rule would require an objective 
party to determine whether disclosed financial interests are 
conflicts and to manage recusals resulting from such 
conflicts.\55\ However, this provision was not adopted in the 
final rule.
---------------------------------------------------------------------------
    \55\Department of Health and Human Services, Centers for Medicare 
and Medicaid Services. Medicare Program; Contract Year 2015 Policy and 
Technical Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs. January 10, 2014, supra.
---------------------------------------------------------------------------
    Another potential area for exploration stakeholders 
suggested was to request that CMS review whether P&T committees 
met their obligation to keep written records of all formulary 
decisions, including any decision to exclude from their 
formularies any available, chemically equivalent generic drugs 
for the most common illnesses or commonly used brand-name 
drugs.

      DRUG MANUFACTURERS' REBATES ARE HIGHER FOR LIS BENEFICIARIES

    The impact of collapsed tiering seems to manifest through 
formulary share rebates received by sponsors. Plan sponsors 
typically receive two kinds of rebates from drug manufacturers 
that may adversely affect generic dispensing rates--formulary 
rebates and market-share rebates. Sponsors receive formulary 
rebates when they structure formularies in ways that either 
encourages beneficiaries to use certain drugs or discourage the 
use of competitors' drugs.\56\ Market-share rebates are based 
on the number of drugs sold to the sponsors' beneficiaries.
---------------------------------------------------------------------------
    \56\Department of Health and Human Services, Office of the 
Inspector General. OIG Concerns with Rebates 2011. (Report # OEI-02-08-
00050), March 2011, p. 15.
---------------------------------------------------------------------------
    HHS OIG released a study in which five of the six sponsors 
interviewed received higher formulary-based rebates for LIS 
beneficiaries than non-LIS beneficiaries.\57\ For example, one 
plan sponsor received a 20 percent rebate for drugs dispensed 
to LIS beneficiaries compared to a 10 percent rebate for the 
same drugs dispensed to non-LIS beneficiaries.\58\ This 
difference may give plan sponsors greater incentive to have LIS 
beneficiaries use brand-name drugs compared to non-LIS 
beneficiaries on the same plan.\59\ One reason why drug 
manufacturers may be providing higher rebates for drugs 
dispensed to the LIS population is because LIS beneficiaries 
have lower copay requirements than non-LIS beneficiaries--and 
therefore do not have the same cost incentives to select 
generic drugs. CMS told us that although they obtain reports at 
the National Drug Code (NDC) level (the unique identifier code 
for drugs) there is no way for them to tell whether a rebate 
was tied to the purchase of a drug by an LIS or non-LIS 
beneficiary.\60\
---------------------------------------------------------------------------
    \57\id.
    \58\id.
    \59\Committee Staff Conference Call with CMS, Sept. 5, 2013.
    \60\id.
---------------------------------------------------------------------------
    It is unclear how rebate practices would be impacted by 
changes to LIS-beneficiary copay changes.

                             OTHER FACTORS

    Apart from plan formularies, there are a variety of other 
factors that can impact the use of generic drugs, including:
         The design of CMS's Plan Finder;
         Beneficiary education and perceptions about 
        generics, and
         Physician Prescribing and Pharmacy Billing 
        Practices
    This section describes these factors and possible 
approaches that should be considered to further increase 
generic dispensing rates.

                         CMS PLAN FINDER DESIGN

    To help beneficiaries compare Part D plans and identify 
plans that meet their needs, CMS developed the Medicare Plan 
Finder interactive website. Plan Finder allows beneficiaries to 
submit information on the drugs they take in order to compare 
plans and estimate annual and monthly out-of-pocket expenses. 
Enabling beneficiaries to compare and shop for private 
prescription drug plans through a web-based marketplace 
increases competition among the plan sponsors. Beneficiaries 
can look for plans that offer the coverage they need for their 
prescriptions at the best prices using the premium and copay 
amounts quoted on Plan Finder.
    The Committee received several comments related to the 
importance of evolving the Plan Finder tool in the future to 
incorporate generics education directly to Medicare 
beneficiaries. Some insurance plans have had significant 
success in the past using online tools to educate consumers 
about the safety and cost-effectiveness of generic drugs. For 
instance, in a Senate Special Committee on Aging hearing at the 
start of the Part D program,\61\ a witness from Blue Cross Blue 
Shield Michigan (Blue Cross) outlined their efforts to educate 
its 183,000 Part D beneficiaries about the benefits of using 
generics. Blue Cross developed the ``Unadvertised Brand 
Campaign'' to provide beneficiaries with useful information 
about generic medications as an alternative to brand-name 
medications.
---------------------------------------------------------------------------
    \61\``The Generic Drug Maze: Speeding Access to Affordable Life-
Saving Drugs.'' Senate Special Committee on Aging, July 20, 2006. 
(online at http://www.gpo.gov/fdsys/pkg/CHRG-109shrg30710/html/CHRG-
109shrg30710.htm). Accessed December 11, 2013.
---------------------------------------------------------------------------
    Essentially, in Blue Cross's campaign, the beneficiary 
selected a brand-name drug from a drop-down menu of options and 
entered the number of pills taken per day. The beneficiary then 
selected an icon, ``Calculate my savings now,'' and the 
computer would generate a table with the drug brand and generic 
names, along with the cost of a single pill and a 30-day 
supply. A box within the table entitled, ``You could save,'' 
clearly depicts the amount of money a beneficiary could save 
simply by switching to a generic alternative. After the 
introduction of the ``Unadvertised Brand Campaign,'' Blue Cross 
noted an increase in the generic dispensing rate from 37.7 
percent to 52 percent.
    Other patient-education methods included advertisements 
that portrayed generics as safe, affordable, and equivalent in 
effectiveness and potency to brand-name medications. These 
advertisements were placed in newspapers, business journals, 
and other publications. A survey conducted after Blue Cross 
began the ``Unadvertised Brand Campaign,'' indicated a six 
percent increase in positive attitudes about generics being 
equivalent to brand-name medications.
    Even though the Blue Cross campaign was undertaken several 
years ago, the technology they used was more sophisticated than 
what Medicare Plan Finder uses today. CMS could consider 
incorporating some of the tools that plan sponsors have 
successfully used into the Plan Finder website to further 
encourage the use of generic drugs.
    For instance, the Plan Finder tool allows beneficiaries to 
search for a generic or a brand-name drug, but not at the same 
time. Although Plan Finder does offer a message telling a 
beneficiary that a lower-cost option is available when a brand-
name drug is selected, the beneficiary must take an additional 
step to select the generic drug. Plan Finder will--through a 
series of confusing steps--show a comparison between brand and 
generic copays, but it misses an opportunity to automatically 
show the consumer the potential cost difference between a brand 
and generic version of a drug, as in the Blue Cross campaign.

Medicare Plan Finder Star Ratings

    As the Medicare Plan Finder has evolved, CMS has 
incorporated quality ``Star Ratings'' on each plan, which 
measures the plan sponsors' performance in four broad areas: 
customer service, member complaints, beneficiary experience, 
and drug pricing and patient safety.\62\ Plan rating measures 
have evolved to put more emphasis on appropriate medication use 
and adherence. For instance, in 2012, measures were added to 
assess beneficiary adherence to medication therapy for 
diabetes, hypertension, and cholesterol. The Star Ratings 
performance data has served as a valuable consumer transparency 
tool.\63\
---------------------------------------------------------------------------
    \62\MedPAC, March 2012, supra at p. 360.
    \63\Government Accountability Office, Report to the Special 
Committee on Aging, Medicare Part D: CMS has Implemented Processes to 
Oversee Plan Finder Pricing Accuracy and Improve Website Usability, 
January 10, 2014.
---------------------------------------------------------------------------
    Although plan sponsors are required to report data about 
generic dispensing rates to CMS, the Star Ratings do not 
include this information. A consumer looking at the Star 
Ratings can see the overall rating, but would not know how that 
rating was derived. For example, a consumer would not know 
about generic dispensing rates or the availability of consumer-
education activities that provide information about lower-cost 
drug options. Express Scripts, a pharmacy benefit manager 
serving approximately 7.5 million Medicare Part D 
beneficiaries, told us that the lack of focus on generic drugs 
in quality ratings is a missed opportunity. We had several 
conversations with CMS about incorporating value-based consumer 
education or generic dispensing rates into the Star Ratings and 
note the potential complexities involved; however, developing 
such a measure could be an important step in encouraging lower-
cost prescription drug use among seniors.

                         BENEFICIARY EDUCATION

Education matters: Assessment of attitudes about generics among seniors

    Even though many older patients have embraced generics as a 
part of their standard treatment regimens, some seniors still 
have negative attitudes about the use of generic drugs. Despite 
the Food and Drug Administration's (FDA) assurances of the 
safety of generic drugs, some consumers still have negative 
perceptions about them.
    A number of studies have identified that patient preference 
for branded drugs may influence physician prescribing 
practices. For example, a study published in the Journal of the 
American Medical Association (JAMA) surveying 3,500 physicians 
in seven specialties, found that approximately four of 10 
physicians report that they sometimes or often prescribe a 
brand-name drug to a patient when a generic is available 
because the patient wanted it.\64\
---------------------------------------------------------------------------
    \64\Campbell, E. G., Genevieve, P., Vogeli, C. & Iezzoni, L., 
``Physician Acquiescence to Patient Demands for Brand-Name Drugs: 
Results of a National Survey of Physicians,'' Journal of the American 
Medical Association. Vol. 173, No. 3. 11 February 2013.
---------------------------------------------------------------------------
    In a 2009 Health Affairs study, 2,500 patients were 
surveyed about their opinions on generic drugs.\65\ Overall, 
survey participants believed that significant savings could be 
achieved through the use of generics instead of brand-name 
medications; however, the majority still preferred brand-name 
drugs. Less than half of those surveyed said that they would 
agree to take a generic medication and 42 percent did not 
believe that generics were safer than brand-name medications. 
Researchers cited several possibilities as to why these 
perceptions exist, including:\66\
---------------------------------------------------------------------------
    \65\Shrank, W. H., et al., ``Patients'' Perceptions of Generic 
Medications,'' supra.
    \66\id.
---------------------------------------------------------------------------
     Associating the word ``generic'' with something 
that is diminished in worth or value, or ``not as good'' as 
brand-name drugs. These patients believed that because a drug 
costs more, it must be more effective than a lower-cost 
generic.
     Inadequate communication about the benefits of 
generics between patients and providers.
     Unease regarding substitution of a generic for a 
brand-name medication at the pharmacy.
    In another study, researchers conducted a literature review 
regarding the use of generics as substitutes for brand-name 
medications. They reviewed 20 scientific papers published from 
2000 to 2011 that examined the attitudes of patients in the 
United States and several other Western countries and found a 
number of factors impact the perception of generic drugs, 
including:\67\
---------------------------------------------------------------------------
    \67\Haakonsen, H., & Toverud, E.L. ``A Review of Patient 
Perspectives on Generics Substitution: What Are the Challenges for 
Optimal Drug Use,'' supra.
---------------------------------------------------------------------------
           Whether the patient has a serious or chronic 
        condition, as not all brand-name drugs for these 
        conditions have equivalent or clinically-appropriate 
        generic substitutes;
           The involvement of the health care provider 
        in counseling the patient and in prescribing generic 
        drugs;
           The patient's education and health literacy;
           The name recognition of the brand-name drug;
           The physical appearance (shape, size, and 
        color) of the generic drug. Some patients expressed 
        confusion about dosage due to the altered appearance of 
        the generic drug; and
           The taste of the generic drug.
    The barriers identified in these scientific studies are 
applicable to older patients, too.\68\ Older patients, as a 
whole, are more chronically ill, have higher health care 
expenditures, and consume medications at much higher rates than 
younger patients.\69\ Although there are exceptions, generally, 
older patients are more resistant to using generic medications 
than any other patient demographic.\70\ Thus, addressing these 
concerns about generics is even more important with seniors.
---------------------------------------------------------------------------
    \68\Shrank, W. H., et al., ``Patients'' Perceptions of Generic 
Medications,'' supra.
    \69\Joyce, G. F., Keller, E. B., Shang, B. & Goldman, D. P., ``The 
Lifetime Burden of Chronic Disease Among the Elderly,'' Health Affairs, 
September 26, 2005; See ``Future Health and Medical Care Spending for 
the Elderly: Implications for Medicare.'' Rand Health Research 
Highlights. Report RB-9146-1-CMS (2005) (online at http://www.rand.org/
content/dam/rand/pubs/research_briefs/2005/RAND_RB9146-1.pdf.).
    \70\Caldwell, D. J., Jaubert, K., Zagar, M., & Sherman, J., 
``Considerations for Generic Drug Use in the Elderly,'' Pharmacy Times, 
January 1, 2007 (online at http://www.pharmacytimes.com/publications/
issue/2007/2007-01/2007-01-6215). Accessed November 21, 2013; 
Iosifescu, A., et al., ``Beliefs about Generic Drugs Among Elderly 
Adults in Hospital-Based Primary Care Practices,'' supra.
---------------------------------------------------------------------------
    To dispel myths about generics, the FDA and plan sponsors 
have used a number of different strategies to educate 
consumers, including Internet promotions, pamphlets, brochures, 
and flyers. Even though educating seniors about their health 
care options may be challenging, it is important, as patients 
who are more informed about their treatment generally have 
better outcomes. Seniors should be encouraged to inquire about 
their medications and should be educated about the right 
questions to ask. In turn, health care providers should explain 
why a generic medication is being prescribed in a way that the 
patient can easily understand. Through better education and 
communication, myths about generic drugs can be dispelled, and 
better health outcomes can be achieved.\71\
---------------------------------------------------------------------------
    \71\Zagaria, M. A. E., ``Generic Medications: Issues in Senior Care 
Pharmacy,'' US Pharmacist. June 19, 2007 (online at http://
www.uspharmacist.com/content/c/10308/?t=men's_health).
---------------------------------------------------------------------------

Medication therapy management

    Educating seniors about the importance of adhering to their 
medication regimen could also play an important role in 
reducing overall health care costs. CBO recently reported the 
savings that could be realized if patients adhere to their 
medication therapies and found that for each one percent 
increase in the number of prescriptions filled by 
beneficiaries, there is a corresponding decrease in overall 
Medicare medical spending. When projected to the entire 
population, this translates into a savings of $1.7 billion in 
overall health care costs for every one percent increase in the 
number of prescriptions filled.\72\
---------------------------------------------------------------------------
    \72\National Association of Chain Drug Stores. Testimony to the 
Senate Special Committee on Aging: 10 Years Later: A look at the 
Medicare Prescription Drug Program. May 22, 2013.
---------------------------------------------------------------------------
    Medication adherence in older patients can be problematic. 
Several studies suggest that medication non-adherence 
contributes to a substantial human and financial toll in the 
United States, with 33 percent to 69 percent of all medication-
related hospital admissions due to non-adherence.\73\ According 
to industry analysts, the cost of medication non-adherence 
exceeded $290 billion in 2009.\74\ Typical reasons older 
patients may not comply with prescribed medication include:
---------------------------------------------------------------------------
    \73\Marrufo, G. et al., ``Medication Therapy Management in a 
Chronically Ill Population: Interim Report.'' Prepared for Steven A. 
Blackwell, Centers for Medicare & Medicaid Services (CMS), Center for 
Medicare & Medicaid Innovation, Acumen, LLC, p. 1. January 2013 (online 
at http://innovation.cms.gov/Files/reports/MTM-Interim-Report-01-
2013.pdf). Retrieved March 5, 2014.
    \74\``Medication Adherence in America: a National Report, 2013.'' 
National Report Card on Adherence, p. 2. National Community Pharmacists 
Association (online at http://www.ncpanet. org/pdf/reportcard/
AdherenceReportCard_Abridged.pdf). Retrieved March 5, 2014.
---------------------------------------------------------------------------
           cost and affordability;
           cognitive decline;
           convenience, including how many times per 
        day the medication must be taken and the difficulty of 
        the treatment regimen;\75\
---------------------------------------------------------------------------
    \75\Martin, L. R., Williams, S.L., Haskard, K. B. & DiMatteo, M. 
R., ``The Challenge of Patient Adherence,'' Therapeutics and Clinical 
Risk Management. 1(3) 189-199. 2005, (online at http://
www.ncbi.nlm.nih. gov/pmc/articles/PMC1661624/pdf/tcrm0103-189.pdf). 
Retrieved March 5, 2014.
---------------------------------------------------------------------------
           risks, including the tradeoff between 
        benefits and possible side effects;
           communication problems between the patient 
        and the health care provider; and
           patients not agreeing with the treatment 
        regimen.\76\
---------------------------------------------------------------------------
    \76\Latif, S. & McNicoll, L., ``Medication and Non-Adherence in the 
Older Adult,'' Geriatrics for the Practicing Physician. Volume 92, No. 
12. December 2009 (online at http://rimed.org/medhealthri/2009-12/2009-
12-418.pdf). Retrieved March 5, 2014.
---------------------------------------------------------------------------
    Interventions such as medication therapy management (MTM) 
programs have been found to lower health care costs by 
preventing adverse outcomes that lead to hospital 
admissions.\77\ MTM is a service or group of services that 
optimize therapeutic outcomes for individual patients.\78\ In 
Medicare Part D, MTM programs must generally include:
---------------------------------------------------------------------------
    \77\Marrufo, G. et al., supra.
    \78\``APhA MTM Central: What is Medication Therapy Management.'' 
American Pharmacists Association, 2014 (online at http://
www.pharmacist.com/mtm).
---------------------------------------------------------------------------
           prescriber interventions to promote 
        coordinated care;
           an interactive comprehensive medication 
        review and discussion with the beneficiary;
           a written summary (in CMS's standardized 
        format) of the prescriber recommendations; and
           frequent monitoring and follow-up of the 
        beneficiary's medication therapies.\79\
---------------------------------------------------------------------------
    \79\Shapiro, J. R., ``CY 2015 Medication Therapy Management Program 
Guidance and Submission Instructions,'' May 7, 2014 (online at http://
www.cms.gov/Medicare/Prescription-Drug Coverage/
PrescriptionDrugCovContra/Downloads/
MemoContractYear2015MedicationTherapyManagementProgramSubmission050714.p
df).
---------------------------------------------------------------------------
    However, plan sponsors vary greatly in how they satisfy 
these service elements. A recent study conducted in conjunction 
with the CMS Center for Medicare and Medicaid Innovation found 
that in 2010, all 678 active Part D contracts with an approved 
MTM program reported offering annual comprehensive and targeted 
medication management to their enrollees. However, these 
programs differed in the ways in which they offered these 
interventions: for example, 81.1 percent of these programs 
presented enrollees with a list of medication therapy 
recommendations, while 29.4 percent provided enrollees with a 
reconciled medication list.\80\
---------------------------------------------------------------------------
    \80\ Perlroth, D. et al., ``Medication Therapy Management in 
Chronically Ill Populations: Final Report.'' Prepared for Steven A. 
Blackwell, Centers for Medicare & Medicaid Services (CMS), Center for 
Medicare & Medicaid Innovation, Acumen, LLC, August 2013 (online at 
http://innovation.cms.gov/Files/reports/MTM_Final_Report.pdf.).
---------------------------------------------------------------------------
    There are several demonstrated savings from MTM programs 
when implemented effectively and targeted to the right 
patients. For example:
           In 2009, Connecticut conducted an MTM study, 
        where pharmacists met with 88 Medicaid patients who 
        averaged 9 to 10 medical conditions and used an average 
        of 15 medications. Within 10 months, pharmacists had 
        identified more than 900 drug therapy problems, 80 
        percent of which they resolved in four visits. 
        Estimated annual savings were $1,123 per patient on 
        medication costs, and $472 per patient on medical and 
        hospital costs.
           In Minnesota, a 10-year evaluation of MTM 
        provided to integrated health system patients estimated 
        a return on investment of $1.29 for every $1.00 spent 
        in MTM costs.\81\
---------------------------------------------------------------------------
    \81\Rucker, N. L., ``Medicare Part D's Medication Therapy 
Management: Shifting from Neutral to Drive.'' AARP Public Policy 
Institute, June 2012 (online at http://www.aarp.org/content/dam/aarp/
research/public_policy_institute/health/medicare-part-d-shifting-from-
neutral-to-drive-insight-AARP-ppi-health.pdf).
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           Within Medicare, CMS reported that Medicare 
        Part D beneficiaries with congestive heart failure and 
        chronic obstructive pulmonary disease (COPD) who were 
        newly enrolled in the Part D MTM program experienced 
        increased medication adherence and discontinuation of 
        high-risk medications. The report also found that 
        monthly prescription drug costs for these beneficiaries 
        decreased by approximately $4 to $6 per month and that 
        they had nearly $400 to $500 lower overall 
        hospitalization costs than those who did not 
        participate in the Part D MTM program.\82\
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    \82\National Association of Chain Drug Stores. Testimony to the 
Senate Special Committee on Aging, May 22, 2013, supra.
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           In another review, researchers analyzed a 
        large random sample of Part D enrollees with diabetes, 
        heart failure, and COPD, to see whether poor adherence 
        to recommended drugs was associated with higher 
        Medicare costs. Researchers found that beneficiaries 
        with poor adherence had higher costs, ranging from $49 
        to $840 per month for patients with diabetes for 
        example.\83\ However, importantly, such beneficiaries 
        were not uniformly more likely than others to be 
        eligible for MTM services.
---------------------------------------------------------------------------
    \83\Stuart, B. S., Loh, F. E., Roberto, P. & Miller, L. M., 
``Increasing Medicare Part D Enrollment In Medication Therapy 
Management Could Improve Health And Lower Costs.'' Health Affairs. July 
2013: Vol. 32, No. 7. p. 1212-1220.
---------------------------------------------------------------------------
    All prescription drug plans in Medicare Part D are required 
to offer MTM services to patients with high annual drug 
spending ($3,100 or more in 2012), who have at least two 
chronic conditions, and who are taking two to eight different 
Part D drugs. Some plans offer MTM services to all 
beneficiaries, but most offer them to less than 10 percent of 
their beneficiaries. Despite conservative estimates that at 
least 25 percent of beneficiaries are eligible for MTM 
services, CMS cited participation rates of less than eight 
percent in 2011.\84\
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    \84\Department of Health and Human Services, Centers for Medicare 
and Medicaid Services. Medicare Program; Contract Year 2015 Policy and 
Technical Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs. Proposed guidance RIN 0938-AR37, 
January 10, 2014.
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    Having a dollar threshold for MTM intervention may 
perversely incentivize brand-name drugs. Not only can a 
beneficiary take multiple generic drugs and not reach the 
$3,100 target threshold, but if a physician or pharmacist 
determines appropriate generic substitutions can be made, a 
beneficiary could lose his eligibility for MTM services by 
falling below the dollar threshold.
    CMS proposed changes to improve participation in a draft 
regulation release in January, including incorporating MTM 
eligibility and program features into the ``Medicare Plan 
Finder'' website and in the annual Medicare and You handbook 
mailed to all beneficiaries.\85\ The agency acknowledged the 
perverse incentive created by the dollar threshold, 
stating:\86\
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    \85\Medicare Program, Contract Year 2015 Policy and Technical 
Changes to the Medicare Advantage and Medicare Prescription Drug 
Benefit Program. CMS-4159-P (online at http://www.gpo.gov/fdsys/pkg/FR-
2014-01-10/pdf/2013-31497.pdf).
    \86\Medicare Program, Contract Year 2015 Policy and Technical 
Changes to the Medicare Advantage and Medicare Prescription Drug 
Benefit Program, supra.

          We are concerned with such variability, especially in 
        cases where a beneficiary meets the minimum number of 
        chronic diseases for eligibility, but may not qualify 
        for MTM because his or her chronic condition is not 
        targeted by the plan, he or she doesn't take enough 
        medications for the plan's program (even though 
        medication management issues are present), or because 
        high utilization of lower cost generics places 
        prescription drug costs for the beneficiary below the 
        cost threshold.\87\
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    \87\id at p. 1948.

    Accordingly, the proposed rule would have lowered the 
annual total drug cost threshold to $620 (the estimated cost of 
two generic prescriptions) and revised the interpretation of 
``multiple Part D drugs'' to mean two or more drugs and two or 
more chronic conditions. However, this provision was not 
finalized in CMS's final version of the rule.
    Given MTM's potential to improve outcomes and lower costs, 
it is important that it reaches the full range of beneficiaries 
who would benefit from active medication management. Expanding 
eligibility criteria is one step, but CMS should also focus 
efforts to improve enrollment. For instance, developing 
outcomes-oriented metrics--such as a ratio for overall rate of 
participation as compared with total eligible beneficiaries--
could help to ensure that the focus is on employing MTM 
services more broadly.

          PHYSICIAN PRESCRIBING AND PHARMACY BILLING PRACTICES

    The Committee found that physician prescribing and pharmacy 
billing practices can also play a significant role in realizing 
the full potential of savings from lower-cost drugs. In 
addition to educating physicians about generics and examining 
industry relationships to identify conflicts of interest, 
questionable pharmacy billing practices should also be 
addressed. HHS OIG stated, in response to the Committee (see 
Appendix 2):

          Health care providers and pharmacies influence the 
        use of generic drugs. For example, generic substitution 
        cannot occur if a health care provider indicates that a 
        brand-name drug is medically necessary. All States 
        allow health care providers to specify that a generic 
        drug should not be substituted for a brand-name drug. 
        The ease with which a prescriber can do this varies 
        across States. In addition, pharmacies might not 
        substitute a generic drug for a host of reasons--for 
        example, because the generic drug is temporarily out of 
        stock, customer resistance to receiving a generic drug, 
        or because substituting a generic drug for a brand-name 
        one would be less profitable for the pharmacy.\88\
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    \88\See Appendix 2.

    This section brings together additional analysis about the 
role physicians and pharmacies can play in increasing generics 
and lowering program costs.

Physician prescribing practices

    Physician education and prescribing practices have a direct 
effect on the potential impact of any policy change made to 
benefit design. Outlier physician prescribing can be a result 
of a number of competing factors: patient demand, industry 
relationships, and physician perceptions. It may also result 
from fraud or abuse, such as when drugs are ordered by 
individuals without prescribing authority.
    Recent HHS OIG reports have identified ongoing significant 
issues with prescription fraud and abuse, as well as with CMS 
efforts to prevent fraud and abuse in the Part D program. In 
June 2013, HHS OIG issued a report entitled, ``Medicare 
Inappropriately Paid for Drugs Ordered by Individuals Without 
Prescribing Authority.''\89\ HHS OIG analyzed all Prescription 
Drug Event records from 2009 and matched them to the National 
Plan and Provider Enumeration System to determine the 
prescriber type, such as physician or dentist. HHS OIG found 
that CMS inappropriately paid for drugs ordered by individuals 
who clearly did not have the authority to prescribe, such as 
massage therapists, athletic trainers, home contractors, 
interpreters, and transportation companies. In ten States, CMS 
also inappropriately paid for drugs ordered by other 
individuals without the authority within those states to 
prescribe, such as counselors, social workers, and 
chiropractors.
---------------------------------------------------------------------------
    \89\See Department of Health and Human Services, Office of the 
Inspector General, Medicare Inappropriately Paid for Drugs Ordered by 
Individuals Without Prescribing Authority, June 2013 (online at https:/
/oig.hhs.gov/oei/reports/oei-02-09-00608.pdf).
---------------------------------------------------------------------------
    In total, Medicare paid $352 million for Part D drugs 
ordered by the physicians with questionable prescribing 
patterns in 2009. Notably, 110 of these physicians were 
associated with 1 or more of the retail pharmacies identified 
as having questionable billing as discussed below. It is 
important to note that questionable billing does not 
necessarily mean fraudulent billing. However, these patterns 
raise flags that warrant further attention. Tens of thousands 
of these drugs were controlled substances and have the 
potential for abuse.
    OIG recommended that CMS: (1) require sponsors to verify 
that prescribers have the authority to prescribe drugs, (2) 
increase the Medicare Drug Integrity Contractor's monitoring of 
prescribers, (3) ensure that Medicare does not pay for 
prescriptions from individuals without prescribing authority, 
and (4) follow up on the individuals without prescribing 
authority who ordered prescriptions. CMS concurred with all 
four recommendations.
    In testimony before the Subcommittee on Federal Financial 
Management, Government Information, Federal Services and 
International Security of the Senate Committee on Homeland 
Security and Governmental Affairs on October 4, 2011, GAO 
highlighted issues with overprescribing of medications when a 
beneficiary receives medications from multiple providers. GAO 
stated that about 170,000 Part D beneficiaries obtained 
prescriptions for frequently abused prescription drugs from 
five or more medical practitioners during calendar year 2008 at 
a cost of $148 million.\90\ Of these, about 120,000 were 
eligible for Part D because of a disability, rather than age. 
In one instance, a single beneficiary received prescriptions 
from 87 different medical practitioners in calendar year 2008. 
Whether the individual actually received those medications, or 
was the victim of identity theft, these multiple prescriptions 
are of concern both from a cost as well as patient-safety 
perspective.
---------------------------------------------------------------------------
    \90\Gregory D. Kutz, Testimony Before the Subcommittee on Federal 
Financial Management, Government Information, Federal Services and 
International Security, Committee on Homeland Security and Governmental 
Affairs.
---------------------------------------------------------------------------
    While CMS requires Part D plans to perform retrospective 
drug utilization review (DUR) analysis and provide education to 
prescribers, according to GAO, CMS does not have authority to 
limit the access of individuals, even those known to have 
obtained the same prescription drugs from multiple providers, 
to either certain prescribers or to certain drugs.
    While CMS is responsible for overseeing the program and 
paying plan sponsors, and the plan sponsors are responsible for 
preventing and detecting fraud, waste, and abuse and 
appropriately paying for drugs under Part D,\91\ preventing and 
detecting fraud, waste and abuse is a shared responsibility 
between CMS, contractors, and plan sponsors. CMS relies in part 
on contractors, known as Medicare Drug Integrity Contractors 
(MEDICs), to investigate fraud. Since these contracts were 
awarded in FY2007, a number of reports have been critical of 
the MEDICs' anti-fraud activities. A January 2013 OIG report 
found that only 21 of 223 identified cases of fraud in Medicare 
Part D were identified internally, through data analysis or 
other means. Most cases originated from passive sources of 
information, such as complaints received through the fraud 
hotline.
---------------------------------------------------------------------------
    \91\Testimony of: Gary Cantrell, Deputy Inspector General for 
Investigations, and Stuart Wright, Deputy Inspector General for 
Evaluation and Inspections, Office of Inspector General, U.S. 
Department of Health and Human Services, Hearing: Curbing Prescription 
Drug Abuse in Medicare, Senate Committee on Homeland Security and 
Governmental Affairs, June 24, 2013.
---------------------------------------------------------------------------
    The reliance of CMS on individual complaints rather than on 
proactive identification described in this report also raises 
questions about whether CMS has the ability to effectively 
prevent fraud, waste, and abuse in the Part D program, or can 
only respond once fraud, waste, and abuse has been identified 
by an external entity or individual.
    CMS's newly finalized regulation in May 2014 did take a 
beginning step forward to crack-down on the issue of 
unauthorized prescribers. Specifically, CMS will require 
prescribers of Part D drugs to enroll in Medicare in order for 
prescriptions they write to be covered under Part D, which 
would help to ensure that Part D drugs are only prescribed by 
qualified individuals. In addition, CMS may now revoke a 
physician's or eligible professional's Medicare enrollment if:
           CMS determines that the physician has a 
        pattern of prescribing Part D drugs that is abusive and 
        represents a threat to the health and safety of 
        Medicare beneficiaries, or otherwise fails to meet 
        Medicare requirements;
           The Drug Enforcement Administration suspends 
        or revokes the physician's Certificate of Registration;
           The applicable licensing or administrative 
        body for any state in which a physician or eligible 
        professional practices suspends or revokes the 
        physician or eligible professional's ability to 
        prescribe drugs.

Physician education should be addressed

    The FDA and plan providers have used a number of different 
strategies to educate physicians about generic drugs--such as 
distributing generic drug samples. However, despite these 
efforts, some studies suggest that physicians have lingering 
concerns about the quality or efficacy of generic drugs despite 
scientific data to the contrary. For instance:
           In a 2011 survey of physicians, about 25 
        percent of physicians reported that they strongly or 
        somewhat disagreed with the statement, ``I believe that 
        generic medications are as effective as branded 
        medications,'' while about half of respondents agreed 
        strongly or somewhat with the statement, ``I am 
        concerned about the quality of generic 
        medications.''\92\
---------------------------------------------------------------------------
    \92\Shrank, W. H., et al., ``Physician Perceptions About Generic 
Drugs,'' Annals of Pharmacotherapy. Vol. 45, January 2011 (online at 
http://scholar.harvard.edu/nkc/files/
2011_physician_perceptions_about_generic_drugs_annals_pharmacotherapy.pd
f).
---------------------------------------------------------------------------
           A survey of 1,891 physicians showed that 
        prescribing behavior shifted in a manner consistent 
        with the number of years of medical practice. Thirty-
        one percent of physicians in practice 10 years or less 
        ``sometimes''' or ``often'' prescribed name-brand 
        medications when patients requested them even when 
        comparable generic drugs were available. The percentage 
        increased to 36 percent of physicians in practice for 
        11 to 30 years and 43 percent of physicians in practice 
        more than 30 years.\93\
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    \93\McGreevey, S., ``Push for Name-Brand Drugs: Industry 
Relationships,'' January 7, 2013. Harvard Gazette (online at http://
news.harvard.edu/gazette/story/2013/01/push-for-name-brand-drugs/); See 
Campbell, E. G., Genevieve, P. K., Vogeli, C., & Iezzoni, L., February 
11, 2013, supra; See Campbell, E. G., Rao, S. R., DesRoches, C. M., 
Iezzoni, L. I., Vogelia, C., Dragana, B. J., et al., ``Physician 
Professionalism and Changes in Physician-Industry Relationships from 
2004-2009.'' Archives of Internal Medicine. 2010; 170 (20): 1820-1826.
---------------------------------------------------------------------------
    An effective way of altering prescribing behavior involves 
providing physicians with individual feedback.\94\ A study 
about interventions designed to change provider prescribing 
behaviors determined that educational outreach as well as audit 
and feedback most consistently resulted in positive 
results.\95\
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    \94\Ostini, R., et al., ``Systemic Review of Interventions to 
Improve Prescribing,'' Annals of Pharmacotherapy, March 2009. Vol. 43, 
No. 3: p. 502-13.
    \95\id.
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    Recent studies have also demonstrated differences in 
prescribing patterns based on the nature of the relationship 
between physicians and the pharmaceutical industry, as well as 
whether the physician is a member of a managed care 
organization. A study published in JAMA found that physicians 
receiving industry-provided food or beverages in the workplace 
or drug samples are significantly more likely to accede to 
patient demands for brand-name drugs. Also, physicians who meet 
with industry representatives for periodic meetings are more 
likely to give in to patient requests for brand names.\96\
---------------------------------------------------------------------------
    \96\Campbell, E. G., Genevieve, P. K., Vogeli, C., & Iezzoni, L., 
February 11, 2013, supra.
---------------------------------------------------------------------------
    In addition, a physician's membership in a managed care 
organization may impact prescribing patterns.\97\ Between 2007 
and 2010, the use of generic drugs among beneficiaries enrolled 
in MA-PD plans consistently exceeded that of beneficiaries 
enrolled in PDP plans by 5 percent. This occurred despite: (1) 
high MA-PD plan copays for generic drugs and (2) PDP plans 
applying utilization management tools (like quantity limits and 
prior authorizations) to more drugs than MA-PD plans.\98\ In 
2013, for example, median copays for generic drugs in PDPs were 
$2 for the preferred generic tier and $5 for the non-preferred 
tier. MA-PD plans with two generic tiers charged $3 for drugs 
in the preferred generic tier and $10 for drugs in the non-
preferred tier.
---------------------------------------------------------------------------
    \97\id.
    \98\Hoadley, J., Summer, L., Hargrave, E. & Cubanski, J., December 
11, 2013, supra.
---------------------------------------------------------------------------
    One of the factors which may affect the increased rate of 
generic prescribing among MA-PD plans is that fewer LIS 
beneficiaries tend to enroll in MA-PD plans. Over 80 percent of 
beneficiaries with high prescription drug costs are LIS 
beneficiaries. Four out of five LIS beneficiaries, or 18 
percent of all Medicare beneficiaries, were enrolled in stand-
alone PDPs, and the remaining (5 percent of all Medicare 
beneficiaries) were enrolled in MA-PD plans.\99\
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    \99\MedPAC, June 2013, supra at p. 163.
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Pharmacy billing practices

    Pharmacies are responsible for dispensing prescription 
drugs to beneficiaries. Plan sponsors contract with pharmacies 
to provide retail, long-term-care, and mail-order 
services.\100\ Pharmacies report to and bill sponsors for any 
drugs dispensed for their beneficiaries. Sponsors aggregate 
this data into ``prescription drug event'' (PDE) files that are 
sent to CMS for reimbursement.
---------------------------------------------------------------------------
    \100\Department of Health and Human Services, Office of the 
Inspector General, OIG Retail Pharmacies with Questionable Part D 
Billing, May 2012, p. 2 (online at https://oig.hhs.gov/oei/reports/oei-
02-909-00600.pdf).
---------------------------------------------------------------------------
    Sponsors rely on pharmacies to provide them with accurate 
information about the drugs they dispense, but CMS has 
identified several instances of questionable Part D billing by 
pharmacies. In a May 2012 review, the HHS OIG strongly 
recommended additional auditing of retail pharmacies with 
Medicare Part D billing. HHS OIG (using data from 2009) issued 
a report that found that:
           Over 2,600 retail pharmacies--representing 
        about 4 percent of all pharmacies nationwide--exhibited 
        signs of questionable billing practices. Together, they 
        billed Part D approximately $5.6 billion. While some of 
        this billing may be legitimate, all pharmacies that 
        bill for extremely high amounts warrant further 
        scrutiny.
           Over 400 pharmacies billed for an extremely 
        high percentage of brand-name drugs. One pharmacy 
        reviewed had 99 percent of its prescriptions dispensed 
        for brand-name drugs. Billing for a high percentage of 
        brand-name drugs may indicate that a pharmacy is 
        billing for brand names but dispensing generics.
    While questionable billing does not necessarily mean 
fraudulent billing, these patterns raise flags that warrant 
further attention. The HHS OIG recommended that CMS take a 
number of steps to strengthen the monitoring of pharmacies, 
including:\101\
---------------------------------------------------------------------------
    \101\id.
---------------------------------------------------------------------------
           identifying pharmacies with questionable 
        billing practices for further review;
           providing additional guidance to sponsors on 
        monitoring pharmacy billing;
           requiring sponsors to refer potential fraud 
        and abuse incidents that may warrant further 
        investigation;
           developing risk scores for pharmacies; and
           following up with pharmacies identified as 
        having questionable billing.
    In some situations, questionable pharmacy billing practices 
could thwart efforts that have been made to incentivize 
generics. For example, a lawsuit has been filed in the Southern 
District of New York by an insurance company, for itself and on 
behalf of the federal government and several states, against 
Walgreens pharmacies for alleged misconduct in using ``Dispense 
as Written'' (DAW) codes in their submission of claims for 
brand-name drugs.\102\ The lawsuit alleges that the pharmacy 
misused codes related to the dispensing of brand-name drugs 
when substitution with generic drugs was mandated under 
Medicaid and Medicare, as well as required under certain 
states' laws.
---------------------------------------------------------------------------
    \102\United States ex rel. Fox Rx, Inc. v. Walgreen Co., No. 12-cv-
07382-RA (S.D.N.Y. Oct. 1, 2013).
---------------------------------------------------------------------------
    CMS finalized regulatory guidance in May 2014 that takes a 
step to better monitor pharmacy billing, as it provides direct 
access to data from sponsor downstream entities, including 
pharmacies. Currently, it can take a long time for CMS's 
contractors (who are often assisting law enforcement) to obtain 
important documents like invoices and prescriptions directly 
from pharmacies, because they must work through the Part D plan 
sponsor to obtain this information. However, the new guidance 
would provide CMS, its antifraud contractors, and other 
oversight agencies the ability to request and collect 
information directly from pharmacy benefit managers, 
pharmacies, and other entities that contract or subcontract 
with Part D sponsors.\103\ This proposal is designed to provide 
more timely access to records--including for investigations of 
fraud and abuse--and responds in part to recommendations made 
by HHS OIG.
---------------------------------------------------------------------------
    \103\Department of Health and Human Services, Centers for Medicare 
and Medicaid Services. Medicare Program; Contract Year 2015 Policy and 
Technical Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs. January 10, 2014, supra.
---------------------------------------------------------------------------

                               CONCLUSION

    The Committee finds that for continued savings to be 
achieved in the Part D program without harming beneficiaries, 
more unconventional strategies will be needed, and 
beneficiaries must be seen and treated as partners in any 
savings that are achieved.
    Future actions to maximize generics use should focus on 
beneficiary education and greater access to medication 
management therapy. Existing program tools--like the Medicare 
Plan Finder--can and should evolve to play a role in 
encouraging beneficiaries to weigh not only coverage options, 
but also potential savings opportunities. Further, in order to 
encourage seniors to switch to lower-cost drug options where 
appropriate it will be necessary to ensure that savings are 
felt not only by the federal government, but also 
beneficiaries. In addition, CMS will need to investigate 
questionable pharmacy billing practices when there are 
suspicions of fraud, waste, or abuse.
    It is the Committee's hope that this report offers a 
starting place to help Members of Congress and the health care 
community to develop new and innovative ideas outside the 
traditional benefit structure to promote greater adherence and 
access to affordable, quality prescription drugs in the Part D 
program.