Health Plan Design Solutions


Generic and biosimilar drugs typically launch at a 30% or more lower cost than their reference branded drugs, yet from 2016 to 2018 only 1 in 4 generics that hit the market were covered by Medicare Part D plans in the first year. 

Pharmacy Benefit Managers (PBMs) who manage access to drug formularies and pricing for health plans have a perverse incentive to keep higher priced drugs on formularies due to the sizable rebates that are generated by branded drugs. PBMs typically keep a percentage of these rebates, but with generics and biosimilar drugs, they either don’t receive them or they are much lower.

What’s more, less than half of generic and biosimilar drugs that were covered on these plans were actually placed on the generic tier for copayment, providing no incentive at all for patients to take these less expensive drugs.

Medicare Part D information is publicly available whereas commercial plan data is not easily accessed to track these points; however, the same PBMs are driving commercial plans today. It is highly unlikely that PBMs would behave differently on commercial plans without active management by employers to protect their bottom line.

Denying patients access to lower-cost generics and biosimilars increases patient cost during their deductible period, lowers patient adherence to drug therapy on more expensive medicines, and raises costs for employer-based health plans.

We strongly urge employers to investigate this practice in their plans and ensure their plan participants have access to lower-cost medications.

More details can be found in this article by DLC’s CEO George Huntley on