Outdated Rule Increases Medicare’s Annual Generic Drug Costs by $26 Billion

US dollar bills with medicine pills

Most people agree that the price of brand name drugs in the U.S. is astronomically high. Yet with 90% of prescriptions filled being generic drugs, not many are paying attention to how overpriced these drugs are, depending on where you buy them.

“The difference between the highest and lowest price being charged for the same generic drug is so large that many billions of dollars could be saved each year by having prescriptions filled at the lowest-cost pharmacies,” writes Alfred Engelberg, in a recent Stat news article on this topic. Engelberg shows how companies like Amazon and Good Rx are game changers in that they are offering prescription drugs at far cheaper prices than what the federal government pays insurance companies for the same generic drugs under the Medicare Part D benefit. Sound crazy? It is.

Engelberg argues that “repealing the current Part D benefit design and replacing it with a system in which the government directly reimburses low-cost pharmacies for filling generic prescriptions would save about $18 billion a year. Patients would save an additional $8 billion in out-of-pocket copayments because the prices these pharmacies charge do not require any form of insurance or any additional co-payment.” He also points out that GoodRx estimates that its full price for filling generic prescriptions is less than the Medicare Part D copayment about one-third of the time.

If the whole point of Medicare Part D is to save beneficiaries money and reduce their out-of-pocket costs for drugs, this article demonstrates how the current design is failing while also investigating the true cost of generic drugs. In a world where discount pharmacies are able to fill generic drugs at an affordable price without insurance, it’s time to redo Medicare’s Part D design to eliminate expensive intermediaries and allow Medicare to buy generic drugs at the lowest price on the market.

Read the whole article here.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.