HKS Authors

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Medicare Advantage prescription drug plans (MA-PDs) and standalone prescription drug plans (PDPs) face different incentives for plan design resulting from the scope of covered benefits (only outpatient drugs for PDPs versus all drug and nondrug services for Medicare Advantage [MA]/MA-PDs). The objective is to begin to explore how MA-PDs and PDPs may be responding to their different incentives related to benefit design. We compared 2012 PDP and MA-PD average formulary coverage, prior authorization (PA) or step therapy use, and copayment requirements for drugs in 6 classes used commonly among Medicare beneficiaries. Data We primarily used 2012 Prescription Drug Plan Formulary and Pharmacy Network Files and MA enrollment data. 2011 Truven Health MarketScan claims were used to estimate drug prices and to compute drug market share. Average coverage and PA/step rates, and average copayment requirements, were weighted by plan enrollment and drug market share. Results MA-PDs are generally more likely to cover and less likely to require PA/step for brand name drugs with generic alternatives than PDPs, and MA-PDs often have lower copayment requirements for these drugs. For brands without generics, we generally found no differences in average rates of coverage or PA/step, but MA-PDs were more likely to cover all brands without generics in a class. We found modest, confirmatory evidence suggesting that PDPs and MA-PDs respond to different incentives for plan design.


Huskamp, Haiden A., Nancy L. Keating, Jesse B. Dalton, Michael E. Chernew, and Joseph P. Newhouse. "Drug Plan Design Incentives Among Medicare Prescription Drug Plans." American Journal of Managed Care 20.9 (July 2014): 562-568.