Medicare’s new private stand-alone drug plans vary significantly – in terms of covered drugs, out-of-pocket costs for specific medications, and restrictions placed on the use of certain drugs – according to a new analysis released today by the Kaiser Family Foundation. 

“The drug law was designed to encourage competition among plans, and in that respect, it's working. But because there are big differences from plan to plan, choice matters,” Kaiser Family Foundation President Drew E. Altman said. “What’s not yet clear is how well people with Medicare can sort through all these differences to make informed decisions.”

The study examined formularies, drug costs and utilization management tools in drug plans offered by 14 national and near-national organizations. These organizations offer 35 unique prescription drug plans that account for a total of 1,222 of the 1,429 packages available to Medicare beneficiaries. The study examined a sample of 152 generic and brand-name drugs, selected to include both drugs commonly used by Medicare beneficiaries, such as those treating high cholesterol and high blood pressure, as well as some less common, high-cost drugs used to treat specific conditions such as osteoporosis and rheumatoid arthritis. Jack Hoadley of Georgetown University, Elizabeth Hargrave of the National Opinion Research Center at the University of Chicago, and Juliette Cubanski and Tricia Neuman of the Kaiser Family Foundation carried out the research. 

Key findings include:

• On average, the plans cover 81 percent of the drugs in the sample, ranging from 64 percent in the most restrictive formulary to 97 percent in the least restrictive formulary. None of the studied drug plans cover all 152 of the sample drugs. 

• Formulary comprehensiveness varies considerably by drug group. Averaged across all plans in the study, about 90 percent of antidepressants, beta blockers, and tumor necrosis factor inhibitors (used to treat rheumatoid arthritis) are covered on plan formularies, compared to about 60 percent of hormonal agents (mostly used to treat osteoporosis) and proton pump inhibitors (used to treat gastrointestinal problems). 

• The cost-sharing that enrollees pay for a given drug when it is covered on the plan’s formulary varies considerably across Medicare drug plans. For example, an enrollee could pay from $15 to $62 for Norvasc (for high blood pressure), $15 to $66 for Fosamax (for osteoporosis) and $15 to $100 for Namenda (for Alzheimer’s disease). The most dramatic variation across plans is for Enbrel (for rheumatoid arthritis), with cost-sharing that varies from a low of $20 in one Medicare drug plan to $1,276 in another plan that covers the drug but charges enrollees 75 percent of its total cost. 

• The most common cost-sharing arrangement is a three-tier system of copayments. Among the 21 plans with such arrangements, the median cost-sharing is $5 for first-tier drugs (generics), $25 for second-tier drugs (preferred brands) and $53 for third-tier drugs (non-preferred brands). 

• Many plans use a “specialty tier,” primarily for biotechnology or injectable drugs. Although CMS issued guidelines encouraging plans to charge beneficiaries no more than 25 percent of the cost of these drugs, eight of the 21 plans using a specialty tier charge between 30 percent and 33 percent. For the specialty tier drugs in the study’s sample, beneficiaries must pay between $149 and $450 for a one-month supply in plans that cover these drugs. Beneficiaries may not be able to request an exception to have specialty tier drugs covered on a lower cost-sharing tier, as they can for other covered drugs, according to CMS rules. 

• Plans vary significantly in the frequency that they restrict enrollees’ access to specific drugs through quantity limits, prior-authorization requirements, and step-therapy provisions (that require enrollees to try a less costly drug before receiving a more expensive alternative). Four of the studied plans use these tools on fewer than one in 10 of their covered drugs, while 13 plans do so on at least one in four covered drugs. 

With so much variation, it’s critical that the government monitor the plans’ formularies and restrictions carefully to ensure people with Medicare get a fair deal no matter what plan they choose,” said Georgetown University researcher Jack Hoadley, Ph.D., one of the authors of the study.