Association for Public Policy Analysis & Management

Background: A unified formulary in Medicare Part D could help the federal government negotiate drug prices with manufacturers. Policy-makers frequently express the concern that a unified formulary would restrict drug choice and access for beneficiaries. However, Part D beneficiaries are subject to formularies established by Prescription Drug Plans (PDPs). Characteristics of drug coverage across PDPs may already result in limited drug choice and access.

Aim: In this study, we assessed the degree of overlap across PDPs in terms of the drugs covered and access, as reflected by utilization controls.

Method: We ran cross-sectional analyses utilizing data from Medicare's Prescription Drug Plan Formulary and Pharmacy Network Files.

Results: There were 750 standalone PDPs available to Part D beneficiaries, offering a total of 57 different drug formularies in November 2016. The drug formularies included a total of 4,354 different drugs representing 382 drug classes. On average, each formulary had 3,058 different drugs (range: 2391-4216) representing 337 drug classes (range: 318-376). About 36% of the drugs (n=1,539) and 75% of classes (n=289) were present in all formularies. On average 16% of drugs in each formulary were subject to some form of utilization control (range: 11-21%); the most frequent was quantity limits.

Discussion: There is significant coverage overlap across PDPs suggesting that Part D beneficiaries may already have limited coverage options in the status quo. We examine some policy solutions such as allowing Medicare to set a unified formulary that allows for central price negotiations, having a "standard", reference formulary that PDPs could compare their formularies to and use to adjust coverage, and allowing Medicare to cooperate with other federal agencies in formulary-setting for some selected high-cost or strategic drugs.