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Why is Medicare so Expensive?? Look at These Prices for Diabetes Drugs

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Walid Gellad, M.D., M.P.H. is an assistant professor of medicine at the University of Pittsburgh, and a staff physician and researcher at the Pittsburgh VA Medical Center.  His research focuses on physician prescribing practices and on policy issues affecting access to medications for patients. He recently granted this interview to reporter Martha Rosenberg.

 

Rosenberg: Your study in the Annals of Internal Medicine's July 16 issue [Brand-Name Prescription Drug Use Among Veterans Affairs and Medicare Part D Patients With Diabetes] compares the use of brand name diabetes drugs in Medicare and the VA and concludes that one billion dollars a year could be saved a year if Medicare adopted the VA's prescribing habits.

Gellad: Yes we looked at diabetes-related medications like oral hypoglycemics, insulins, statins and ACE inhibitors and found that use of brand-name drugs was much greater in Medicare than the VA in almost every region of the country--two to three times as high as Medicare.

Rosenberg: When you started this research, did you expect such dramatic findingGellad:I expected rates would be higher in Medicare, but didn’t realize they would be so much higher. As a VA doctor, I often see veterans who have outside insurance but still come to the VA to get cheaper drugs. For example, some patients might come in to get Lipitor at the discounted, VA price, but they didn’t realize they could switch drugs to get a less expensive, generic instead--one that could be filled outside the VA.

Rosenberg:Can you explain the difference between the two agencies' prescribing systems?

Gellad:Medicare uses over 1,000 private plans with distinct formularies to administer its drug benefit, whereas the VA administers its own benefit using one national formulary. All veterans face the same low cost sharing, and benefits are managed by a central pharmacy benefits manager which has substantially lowered pharmacy spending for the VA.

Rosenberg:You write that previous studies have compared medication prices between the VA and Medicare but not medication choices and cite the VA's promotion of therapeutic substitution. Can you explain?

Gellad:That’s right,and medication choice is just as important for controlling spending as price is.  In this paper we look at what might happen to spending if price actually stays the same, but we changed the drugs prescribed. Unlike generic substitution in which a generic drug might be switched for a brand drug like simvastatin for Zocor [the generic and brand names of the same drug] therapeutic substitution, done by a clinician, interchanges generic drugs that are in the same class but not identical to the brand drug--for example, generic simvastatin might be substituted for the brand name atorvastatin which is Lipitor.

Rosenberg:Another factor you cite in cost savings is the lack of visits of drug reps to the VA.

Gellad:That is one potential factor, yes. Most VA doctors are not visited by pharmaceutical sales representatives and do not give out free samples. We are also a salaried workforce and it may be possible that doctors who are willing to accept salaries have a different perspective on marketed drugs.

Rosenberg:You write that private Part D plans can lose market share if they don't offer the popular, brand name drugs. Yet those are the exact drugs that inflate costs!

Gellad:Yes, it was thought that if the Part D plans had to compete to get members they will keep prices lower, but the flip side is they need to offer the drugs patients are asking for if they want Medicare beneficiaries to enroll.

Rosenberg: If government administered plans produce such cost savings, what is the appeal of private plans?

Gellad:The appeal of having many private plans administer the drug benefit is that competition between them presumably will offer patients more choices and better prices, in a well functioning market.Many people would not accept a central government authority making decisions about drugs available to them.  It turns out, however, that all drugs are available to individuals receiving benefits through VA, it’s just that in some cases physicians have to make a good case for why they are needed.  I am not proposing Medicare turn into the VA, but the truth is that financial resources for Medicare are limited. Money spent in one place that is not needed cannot be spent in another. There can’t be a medical reason that so many more patients on Medicare need brand name drugs compared to those than at the VA.