Medicare Part D spent $2.6 billion more in 2018 on generic drugs compared to Costco, likely due to the inefficient distribution system, a new study found.
The study published Tuesday in the Journal of the American Medical Association focuses on how intermediaries in the generic drug supply chain may be driving up costs for Medicare. In 2018, 88% of Medicare Part D prescriptions were for generic drugs, the study said.
“Our analysis highlighted the inefficiencies the current system introduces through its complex and opaque system of intermediaries, which Costco largely bypasses,” according to the study.
It looked at 1.4 billion Part D claims for 184 generic drugs. Medicare overspent Costco member prices by 13.2% in 2017 and 20.6% in 2018.
“Total overspending increased from $1.7 billion in 2017 to $2.6 billion in 2018,” the study said.
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Researchers also explored differences in overspending based on the prescription fill periods.
For instance, in 2018 Medicare overspent Costco on 7.3% of 30-day prescription fills compared to nearly 30% for 90-day fills.
The study did not factor in Costco’s membership fees. However, since the fees only account for 2.2% of the discount store’s annual revenue “so it is unlikely that such fees are materially subsidizing product prices,” the study said.
Researchers hypothesized that intermediaries such as pharmacy benefit managers and wholesalers have contributed to higher prices paid by Medicare, but Costco’s “streamlined distribution system” helped save money on generic drugs.
The study did not look into brand-name drugs, which other research has pegged as a major source of drug spending.
Part D spending grew by 26% from 2013 to 2018 due largely to high launch prices for new pharmaceuticals, a report from the Medicare Payment Advisory Commission said.
Experts are also concerned about the impact on Part D spending of a new Alzheimer’s drug called aducanumab that was granted accelerated approval last month by the Food and Drug Administration. The drug has a $56,000 a year price tag.