Medicare Part D and the Department of Veterans Affairs (VA) are two major government payers of health benefits that use different approaches to managing prescription drug benefits, and a study that looked at managing brand-name prescription drugs shows a vast difference in efficiency.

Walid F. Gellad, MD, MPH, and colleagues reviewed brand-name diabetes medication use by Medicare beneficiaries and by a corresponding group of veterans ages 65+, all with diabetes.

“Use of brand- name drugs for Part D beneficiaries for these medications was two to three times higher than VA patients,” says Gellad, a physician and researcher at the VA Pittsburgh Healthcare System and the University of Pittsburgh.

Part D beneficiaries were more likely to use brand-name rather than generic oral hypoglycemic agents (35% vs. 13%), statins (51% vs. 18%), angiotensin-converting enzyme (ACE) inhibitors or angiotensin-receptor blockers (ARBs) (43% vs. 21%), and insulin analogues (75% vs. 27%) than their VA counterparts.

“We can look at the rates of generic use in the VA and use that as a benchmark. We should be able to take care of patients with diabetes using fewer brand-name agents and still maintain high quality care. I think most clinical executives know that, but here’s a concrete example of a system in which we can take good care of these patients with many fewer brand-name drugs — there’s incredible cost savings associated with that,” says Gellad. The researchers found that if Medicare were to use the same percentage of generic antidiabetes drugs as the VA, it would save $1 billion in a year.

That billion-dollar savings is within Medicare‘s reach, too. “What’s most amazing is that we don’t have to talk about whether Medicare has to negotiate drug prices — we don’t have to talk about prices of brand-name drugs at all,” says Gellad. He concedes that obtaining the savings might be easier said than done, “but it doesn’t require changing any law; it simply requires that patients be prescribed fewer brand-name drugs.”

The results show that providers can push generic rates a lot higher and maintain high-quality care. “There’s a lot to learn from the VA in how to manage a prescription drug system, which can be applied to the private sector,” says Gellad. “We all have limited resources, and we can maintain high quality care with fewer brand-name drugs.”

Prescription spending and projected spending if use of brand-name drugs should change in 4 drug groups. Patients had diabetes, were age 65+, and were in Medicare Part D in 2008.

Prescription spending and projected spending: Medicare Part D vs. VA

Source: Gellad WF, et al. Brand-Name Prescription Drug Use Among Veterans Affairs and Medicare Part D Patients With Diabetes: A National Cohort Comparison. Ann Intern Med. 2013 Jun 11. [Epub ahead of print] Available at . Permission to use granted by Annals of Internal Medicine.

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There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

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Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

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