Medicaid Spends More For Branded Drugs After Generics Become Available

According to research presented at the AMCP 2017 Annual Meeting, Medicaid formulary approaches generally lead branded drugs to become more expensive after a generic competitor is released. This cost trend runs counter to the expected trend experienced by most commercial payers after the release of a generic product. 

“For commercial payers, launch of generics leads to a fast loss of total prescription share; however, the impact on Medicaid expenditures may be different, given different formulary approaches,” Yi Han, PhD, executive vice president of market access and HEOR at Cello Health, and colleagues wrote in their study. “With biosimilars poised to become widely available in the United States, we sought to understand the market dynamics between generic and branded drugs in the Medicaid program as a baseline for future evaluation of biosimilar market dynamics.”

In order to understand the Medicaid market dynamics related to introduction of competitive generics, the researchers collected quarterly Medicaid State Drug Utilization data prices and National Average Drug Acquisition Cost data from the CMS. They identified branded drugs with a generic first option made available between 2014 and 2015. A total of 167 unique drugs were tracked over the study. The researchers also tracked the volume and utilization of both branded and generic drugs over the study period. 

“Branded drug utilization over the entire time window was analyzed using the Cochran-Armitage trend test, and the relationship between pricing and uptake patterns among generic products and their corresponding branded drugs was explored using descriptive statistics and pairwise t-tests,” Dr Han and colleagues explained in their poster.

Study results showed that as generic drugs were released on the market, Medicaid utilization of generics increased; however, spending on branded drugs increased despite their loss of market share. The researchers also found that in the first quarter after a generic was launched, prices of branded products usually increased above pre-generic levels. Furthermore, between Q1 and Q4, these prices increased from and average of 104% of the pre-generic price to 112%, suggesting that the branded products continue to get more expensive over time. 

“These results suggest that branded products became more expensive over the study period during which generics became available,” Dr Han said in the presentation. “Multiple factors may have contributed to this trend, such as the introduction of several novel, high-cost, branded treatments during the study period and slow uptake of generics to replace branded product usage. These results are in contrast with expected findings based on commercial payers, where prices of branded products fall rapidly after generic launch and may reflect differences in formulary systems and approaches between commercial payers and Medicaid.”  

Dr Han and colleagues noted that these results can be utilized to understand how introduction of biosimilars will impact Medicaid spending.

“Although there are insufficient data on biosimilars to compete a similar analysis, results from this study of generics suggest that market dynamics of non-innovator drugs in the Medicaid program may differ from those of commercial payers,” they said. “Future analyses will evaluate market dynamics associated with biosimilar introduction in this population.”—David Costill