Over Half of Generic Drugs Are Not on Part D Generic Tiers

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Summary

In recent years, Medicare Part D plan tier placement of generic prescription drugs has declined, from 64.5% in 2016 to 43.8% in 2024.

The Centers for Medicare & Medicaid Services (CMS) permits Medicare Part D plans flexibility to design drug formularies and structure tiers, within certain requirements. Since 2017, CMS has permitted plans to include a greater number of generic drugs on the non-preferred tier if they replace the “non-preferred brand” tier with a “non-preferred drug” tier. Generally, generic drugs placed on higher formulary tiers have higher cost-sharing requirements than those placed on lower formulary tiers. Plans may place generic drugs on non-preferred tiers to incentivize the use of preferred drugs, which may be either brand or generic drugs.

To assess the evolution of this tiering policy, Avalere analyzed the distribution of generic prescription drugs on tiers in Part D in plan years (PYs) 2016–2024. We found that, over time, Part D plan sponsors placed an increasingly higher proportion of covered generic drugs on non-generic tiers (Figure 1). The analysis also found that a greater proportion of generics have been placed on non-preferred tiers since 2016. Specifically, the percentage of generic drugs placed on non-generic tiers grew 20.7 percentage points, from 35.5% in 2016 to 56.2% in 2024. At the same time, the percentage of generic drugs on preferred generic tiers decreased from 13.6% to 11.5% between 2016 and 2024. Additionally, the share of generic drugs on preferred brand tiers increased from 15.0% to 17.5% from 2016 to 2024 and peaked at 20.1% in 2022.

Figure 1. Distribution of Generic Drugs on Part D Formulary Tiers, 2016–2024

Overall, the proportion of generic products placed on non-generic tiers (i.e., any tier not designated exclusively for generics) has increased over time but stabilized in recent years to 56% (Figure 2). Since 2016, there has been a 20.7 percentage point increase; since 2019, there has been a 9.9 percentage-point increase.

Figure 2. Distribution of Generic Drugs on Generic and Non-Generic Tiers, 2016–2024

 

Methodology

Avalere used the PY 2023 and PY 2024 formulary and benefit design information contained in the Medicare Part D public use files released in October 2022 and October 2023, respectively. Using this data source, Avalere assessed the distribution of generic products by aggregating them across five Part D tier categories: preferred generic, generic, preferred brand, non-preferred, and specialty. Tiers were categorized using the Part D tiering data submitted by plans in the Q1 2023 and Q1 2024 benefits data. Drugs on other or unknown tiers were excluded from these results.

For plans that offer a preferred specialty tier in PY 2023 and PY 2024, Avalere grouped the non-preferred and preferred specialty tiers into the specialty tier categorization.

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

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