skip to Main Content

Avalere Analysis Examines Drug Spending in Medicare Part D

  • This page as PDF


As policymakers increasingly consider policy options to reform Medicare Part D and reduce program expenditures, an Avalere analysis examines spending across classes with various availability of brand and generic drugs.

To ensure plan formularies in Part D cover treatments across all diseases and conditions, Medicare establishes coverage standards based on guidelines published by the United States Pharmacopeia (USP) that group drugs into categories and classes. USP categories are broader groupings designed to include all therapeutic agents for diseases and conditions. USP classes provide more granular therapeutic and pharmacologic groupings of Food & Drug Administration (FDA) approved medications within specific categories, consistent with current US healthcare practices and standards of care.

Plans must cover at least 2 drugs per category and class in most cases. CMS requires more generous coverage in the classes of clinical concern, or the “protected classes,” which include drugs for certain mental health conditions, seizures, HIV, cancer, and immune suppression post-transplant.

Classes can vary widely in the number and types of drugs they include, depending on how many drugs are available to treat a particular condition and the clinical similarity of those products. While some classes may have only a single drug, other classes may include a large number and mix of brand and generic products. Part D spending patterns may reflect these differences in classes.

In 2017, brand drugs accounted for 77% of total Part D spending ($117.1 billion), while generics accounted for the remaining 23% of spending ($34.4 billion). Specifically, single-source brand drugs accounted for almost three quarters (72%) of total Part D spending ($109.3 billion), and the remainder of brand spending was on multi-source brand drugs.1 While single-source brand drugs do not have an equivalent generic drug available on the market, the majority of 2017 Part D spending on single-source brand drugs was in USP classes that included other generic or brand drugs. Less than 1% ($0.9 billion) of total Part D spending was for single-source brands that were the only product available in their therapeutic class.

Part D Spending by Class and Type of Drug, 2017

Of the $151.4 billion in total Part D spending, 56% ($85.1 billion) was for single-source brand drugs in therapeutic classes that contained at least one generic drug. Another 15% ($23.2 billion) of spending was for single-source brand drugs in therapeutic classes that had at least one other brand drug available, but no generics. And brand drugs with generic equivalents captured 5% ($7.8 billion) of total Part D spending in 2017.

1 Drugs that do not yet face competition from equivalent generics are referred to as “single-source” brand drugs. Once a drug loses its intellectual property protection, one or more manufacturers can make a generic version of the drug, which can be used instead of the brand product. Brand drugs with generic equivalents are called “multi-source drugs.”

To receive updates from Avalere, connect with us.


Avalere mapped Part D drugs listed under USP MMG-Formulary Reference File (FRF) to MediSpan to identify single-source and multi-source drugs as well as brand and generic products. The USP MMG-FRF maps the USP MMG v7.0 to the CMS 2017 FRF to create a comprehensive list of drugs that fall under each class of the USP MMG v7.0. Drugs listed as having “no USP class” in the USP MMG-FRF were analyzed as a separate “class” under their respective therapeutic categories. MediSpan’s determination of a generic product requires that a product be pharmaceutically equivalent but not necessarily bioequivalent. Avalere used MediSpan’s determinations but did not assess products’ therapeutic equivalence. Avalere used the 2017 Part D Public Use File (PUF) to identify the Part D spending associated with each drug.

Funding for this research was provided by the Pharmaceutical Research and Manufacturers of America (PhRMA). Avalere Health retained full editorial control.

From beginning to end, our team synergy
produces measurable results. Let's work together.

Sign up to receive more insights about Federal Policy
Please enter your email address to be notified when new Federal Policy insights are published.

Back To Top