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Issue Brief: Medicare Drug Plans Exclude Coverage for Many Drugs in the ‘Protected Classes’

2/27/2019

 
Analysis of Medicare claims data reveals that Medicare Part D plans only cover about two-thirds of drugs in the ‘six protected classes,’ often excluding brands when there is a generic alternative.
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​Medicare prescription drug plans only provide coverage for a select group of drugs — that list of drugs they cover is commonly known as a formulary. These formularies provide plans the ability to exclude coverage of certain medications while favoring others, which they often use as leverage to negotiate discounts from drug manufacturers.  These same principles apply within Medicare’s “six protected classes” of medications, even as guardrails help ensure patients with the most complex conditions (ex. mental illness, cancer, HIV, organ transplants, epilepsy) have access to a broader selection of treatments than is available under the standard Medicare benefit.

Congress codified the six protected classes in 2008 as part of the Medicare Improvements for Patients and Providers Act (MIPPA) to ensure those patients with the most complex health conditions would have access to needed medications.  The original policy required Medicare Part D drug formularies to include “all or substantially all” drugs in the six identified classes. Although the law was updated in 2010 to require coverage of “all” drugs in the protected classes, Medicare regulations have not been updated to reflect the new standard.
 
While Part D plans are required to cover all unique products in the protected classes, this requirement does not result in universal coverage. In fact, often times, plans will opt not to cover brand name drugs when clinically equivalent generic drugs are available. For example, if there is one brand product in a category and three generic products, the health plan may choose to cover just one of the four available drugs in this category. The Centers for Medicare and Medicaid Services (CMS) walks through these exceptions in their Prescription Drug Benefit Manual (see pg. 28), where they detail the following exclusions to coverage within the protected classes:

  • multi-source brands of the identical molecular structure;
  • extended release products when the immediate-release product is included;
  • products that have the same active ingredient or moiety (i.e. brand vs. generic); and
  • dosage forms that do not provide a unique route of administration.
 
Utilizing this policy, plans often exclude coverage for a significant amount of medications within the protected classes. In fact, according to Avalere’s analysis of Medicare claims data, Part D plans covered just 67% of available drugs within the protected classes on average (brand and generic combined) and only 60% of brand drugs. Further, in classes where there are more generic medications available, even more branded medications were excluded from formularies. In the class for antidepressants, for example, plans cover only 37% of brand name medications, and for anticonvulsants they cover just 46% of brand name products.
 
This data demonstrates that when there are multiple clinically equivalent drugs available in a class, plans typically choose to cover the lower cost generic products. This ability to exclude coverage of certain medications allows plans to hold down cost and can enhance a plan sponsor’s negotiating power with manufacturers. But still, as detailed in a previous issue brief, guardrails such as the protected classes are necessary to ensure that drug plans are providing access to an appropriate range of medications and keeping people healthy.

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