New Analysis of Trends in Part D Generic Tiering, Pricing, and Patient Spending

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New Avalere analysis examines longitudinal trends across a cohort of generic drugs, finding increases in aggregate patient spending over time and in placement on higher tiers in Medicare Part D.

Prior Avalere analyses have assessed the distribution of generic drugs across tiers in Medicare Part D, finding that Part D plan sponsors are increasingly placing generic drugs on higher tiers over time. Generally, generic drugs placed on higher formulary tiers have higher cost-sharing requirements than those placed on lower formulary tiers, suggesting that the trends in tier placement could result in higher patient out-of-pocket (OOP) spending for some generic prescription drugs.

To provide additional insight into longitudinal trends for generics in Part D, this new analysis examines changes in generic tier placement, patient out-of-pocket spending, and product pricing over time. Avalere isolated a cohort of generic drugs which includes only products that were on the market in 2011, 2015, and 2019. Avalere limited the analysis to this cohort to control for changes resulting from the launch of additional generics over time.

Key Findings

The proportion of generic drugs covered on lower tiers in Part D plans decreased over the time horizon assessed

Consistent with prior findings, the analysis found that the percentage of generic drugs on Tier 1 (usually preferred generic) decreased from the base year to 2019, while the percentage of generic drugs on Tier 3 (usually preferred brand) and Tier 4 (usually non-preferred drug) increased (Figure 1). The decline in the percentage of generics on Tier 1 was greatest between the years 2011 and 2015, where placement decreased from 72.6% to 19.6%.

Figure 1. Percentage Distribution of Generic Drugs on Part D Formulary Tiers
Figure 1. Percentage Distribution of Generic Drugs on Part D Formulary Tiers

*The analysis was completed using tier number rather than tier name. From 2006 through 2011, Part D plans largely offered a benefit with up to 4 formulary tiers—often 1 generic tier, 2 brand tiers (preferred and non-preferred), and 1 specialty drug tier. Under this structure, generic drugs were usually placed on the generic tier. By 2015 and beyond, most Medicare Part D plans moved to a 5-tier structure, often following this pattern: 1) preferred generic; 2) non-preferred generic; 3: preferred brand; non-preferred drug; and 5) specialty. Note that Tier 6 often refers to “other”, “select care”, or “unspecified” tier.

The total aggregate dollar amount that patients spent each year for this cohort of generic drugs increased over time

To quantify the impact of trends in tier placement, Avalere calculated the total dollar amount that patients spent on the cohort of generic drugs in Medicare Part D (Figure 2). Patients spent $8.5 billion on generics in 2011, and that number increased to $20 billion in 2019, an increase of $11.5 billion or 135%.  There was an increase in the total number of prescriptions of 21%. However, this increase in total prescriptions was less than the increase in total OOP spending. At the same time, Medicare Part D enrollment increased by approximately 30% from 2011 to 2015, and by 18% from 2015 to 2019.1

Figure 2. Aggregate Annual Generic OOP Spend for Patients
Figure 2. Aggregate Annual Generic OOP Spend for Patients

Average negotiated prices declined from 2011 to 2019

Avalere found that average negotiated prices at the drug level increased by 8.49% from 2011 to 2015 and decreased by 7.83% from 2015 to 2019, with a negligible (-0.01%) overall change from 2011 to 2019. These findings are consistent with a 2019 Medicare Payment and Advisory Commission analysis that found that the average cost of all prescription generic drugs decreased 13.7% from 2006 to 2018 and decreased an additional 11% from 2018 to 2019.


Overall, the analysis found that generics in this cohort were placed on higher tiers and that patient OOP spending increased over the time horizons assessed. There were moderate increases in volume over the assessed time period, and average prices increased from 2011 to 2015 and then decreased from 2015 to 2019.

These findings can help stakeholders understand some of the trends in generic tiering and patient cost sharing over time. However, this analysis examines trends within a defined set of generic products and is not necessarily reflective of trends for generics that were not on the market in 2011, 2015, and 2019. Additionally, the analysis did not examine if other factors could impact product tier placement and patient spending, such as changes in Medicare Part D enrollment, new drugs in the marketplace, shifts in prescribing patterns, or changes in clinical guidelines.


Avalere utilized the Centers for Medicare & Medicaid Services (CMS) Medicare Part D Public Use Files to assess generic drug tier placement for all Medicare Advantage prescription drug plans and standalone Part D plans. Different Part D plans can place the same product on different tiers, and thus the analysis reflects the percentage distribution of all plan-drug combinations.

To calculate product volume, Avalere used the CMS Medicare Part D Drug Dashboard files to identify the number of prescriptions. Medicare Part D utilization in the CMS Medicare Part D Drug Dashboard files does not provide information beyond the chemical entity and brand name of a drug. As such, Avalere assumed that the volume for each chemical entity was evenly distributed among package sizes.

Negotiated price was calculated at the drug level using data from CMS Pricing Information Files and is unweighted.

Patient spending was calculated by assessing the negotiated price and assigned cost sharing for the tier of the product and multiplying it by volume. Cost sharing was weighted by enrollment in each plan. Avalere did not incorporate other components of the Part D benefit, including plan deductibles, the coverage gap, low-income subsidies, and other components of the Medicare Part D benefit.

Funding for this research was provided by The Association for Accessible Medicines. Avalere retained full editorial control.

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  1. Kaiser Family Foundation, “An Overview of the Medicare Part D Prescription Drug Benefit,” October 2021.

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