U.S. Department of Health and Human Services 
Office of Inspector General 
Part D Plan Preference for 
Higher-Cost Hepatitis C Drugs 
Led to Higher Medicare and 
Beneficiary Spending 
       
Suzanne Murrin 
Deputy Inspector General for Evaluation and Inspections 
August 2022, OEI-BL-21-00200  U.S. Department of Health and Human Services 
 
Office of Inspector General 
Report in Brief 
August 2022, OEI-BL-21-00200 
Why OIG Did This Review  Part D Plan Preference for Higher-Cost 
In the last decade, Medicare Part D 
Hepatitis C Drugs Led to Higher Medicare 
and its beneficiaries spent billions 
of dollars on revolutionary yet  and Beneficiary Spending  
costly hepatitis C drugs.  In 
response to concerns over the 
What OIG Found 
affordability of hepatitis C  Key Takeaway 
Following the introduction of 
treatments, drug manufacturer 
Medicare beneficiaries are much  authorized generic versions of two 
Gilead introduced authorized 
less likely to receive lower-cost  brand-name hepatitis C drugs
generic versions of two of its 
versions of the same drugs (i.e.,  Epclusa and Harvoni in 2019, use of 
brand-name hepatitis C drugs in 
authorized generics)as well as  the authorized generic versions 
2019 (authorized generics are 
other widely-used lower-cost  increased in Medicaid at greater rates 
brand-name drugs that are sold 
brand-name drugsto treat   than in Medicare Part D.  In 2020, 
without the brand name on their 
hepatitis C.  Part Ds  some Part D plans did not cover the 
label).  Despite the availability of 
programmatic structure may lead  identical authorized generics, limiting 
these authorized generics, as well 
to plan sponsors preferring  beneficiary access to less costly 
as other lower-cost brand options, 
higher-cost versions, resulting in  options.  Medicare beneficiaries also 
preliminary research suggested 
beneficiaries paying thousands  were less likely to use other lower-
that Part D beneficiaries continued 
more out-of-pocket and nearly  cost brand-name options in 2020 
to be more likely to use 
double Medicare reinsurance.  compared to Medicaid beneficiaries.  
higher-cost hepatitis C drugs than 
Medicaid beneficiaries, leading to  Although rebates from manufacturers reduced overall Part D spending for 
higher spending in Part D.   higher-cost hepatitis C drugs (such as Epclusa and Harvoni), they provided 
Reflecting on OIGs goal of  little relief to beneficiaries or the Medicare program.  Part D beneficiaries 
identifying opportunities to lower  without financial assistance paid, on average, $2,200 more out of pocket for 
prescription drug spending for  higher-cost hepatitis C drugs in 2020.  Further, Medicares average 
patients and programs, we  catastrophic coverage payment for a beneficiary prescribed a higher-cost 
conducted this review to explore  drug was over $8,000 more compared to a beneficiary prescribed a lower-
possible incentives created by  cost drug.  As a result, Medicare spent $155 million more in catastrophic 
Part Ds programmatic structure  coverage payments for higher-cost hepatitis C drugs, despite a similar 
that may be influencing use of  number of beneficiaries in each cost group reaching catastrophic coverage. 
higher-cost hepatitis C drugs in 
Medicare.  OIGs findings about utilization trends for higher-cost hepatitis C drugs in 
Medicare align with experts suggestions that certain programmatic factors, 
How OIG Did This Review  such as manufacturer rebates, may be providing incentives for Part D plan 
We used claims data to compare  sponsors to prefer that their enrollees use higher-cost drugs.   
utilization of hepatitis C drugs in 
Medicare Part D to utilization in  What OIG Recommends and How the Agency Responded 
Medicaid in 2019 and 2020.  We  We recommend thatto reduce out-of-pocket costs for beneficiaries and 
also compared inclusion of  combat rising drug spending in Medicare Part Dthe Centers for Medicare 
higher-cost versus lower-cost  & Medicaid Services (CMS) encourage Part D plans to increase access to and 
hepatitis C drugs in 2020 Part D  use of the authorized generic versions of Epclusa and Harvoni, within the 
plan formularies.  We then  authorities granted under statute.  We also recommend that CMS pursue 
examined the effects utilization  additional strategiessuch as educating providers and pharmaciesto 
trends have on Medicare and  increase access to and use of lower-cost hepatitis C drugs in Medicare Part D.  
beneficiary spending.  CMS concurred with both of our recommendations.   
   
 
TABLE OF CONTENTS 
 
 
BACKGROUND ................................................................................................................................................................ 1 
FINDINGS ........................................................................................................................................................................ 9 
Through 2019 and 2020, the use of authorized generics to treat hepatitis C grew steadily in both 
Medicare and Medicaid; however, Medicare beneficiaries were still much more likely to be prescribed 
the brand-name counterparts .............................................................................................................................................. 9 
Lack of formulary inclusion among Part D plans is likely a primary factor in the relatively low use of 
authorized generics to treat hepatitis C in Medicare ................................................................................................ 10 
In addition to being well ahead of Medicare in the adoption of authorized generics to treat 
hepatitis C, Medicaid utilization of lower-cost brands far surpassed Medicare utilization ........................ 11 
The large rebates offered by manufacturers for higher-cost hepatitis C drugs benefit plan sponsors 
but provide little relief to beneficiaries who received the drugs or the Medicare program ...................... 13 
CONCLUSION AND RECOMMENDATIONS ........................................................................................................... 16 
Encourage Part D plans to increase access to and use of the authorized generic versions of Epclusa 
and Harvoni, within the authorities granted under statute .................................................................................... 17 
Pursue additional strategiessuch as educating providers and pharmaciesto increase access to and 
use of lower-cost hepatitis C drugs in Medicare Part D .......................................................................................... 17 
AGENCY COMMENTS AND OIG RESPONSE .......................................................................................................... 19 
DETAILED METHODOLOGY ...................................................................................................................................... 20 
APPENDICES ................................................................................................................................................................. 23 
Appendix A: 2020 Medicare Part D and beneficiary drug cost responsibility by coverage phase for 
beneficiaries who qualify for the LIS ................................................................................................................................ 23 
Appendix B: Utilization trends of beneficiaries who initiated treatment with a lower-cost hepatitis C 
drug in Medicare Part D and Medicaid, 2019-2020 ................................................................................................... 24 
Appendix C: Average 2020 beneficiary out-of-pocket costs for higher-cost versus lower-cost 
hepatitis C drugs among beneficiaries receiving varying levels of financial assistance .............................. 25 
Appendix D: Agency Comments ....................................................................................................................................... 26 
ACKNOWLEDGMENTS AND CONTACT ................................................................................................................. 29 
ABOUT THE OFFICE OF INSPECTOR GENERAL .................................................................................................... 30 
ENDNOTES ..................................................................................................................................................................... 31  
   
BACKGROUND 
OBJECTIVES 
1.  To compare utilization of lower-cost hepatitis C drugs between Medicare 
Part D and Medicaid, focusing particularly on the authorized generic versions 
of Epclusa and Harvoni. 
2.  To identify programmatic factors that may be contributing to observed 
utilization patterns of higher-cost drugs in Part D. 
3.  To examine the spending difference between higher-cost and lower-cost 
hepatitis C drugs for Part D and beneficiaries. 
 
In 2020, Medicare Part D spent roughly $1.6 billion for drugs used to treat more than 
34,000 beneficiaries with chronic hepatitis Ca liver infection that can lead to 
life-threatening conditions if untreated.1, 2  With the approval of Harvoni in 2014, 
direct-acting antiviral drugs that can clear the hepatitis C virus from the body 
(hereinafter referred to as hepatitis C drugs) became the standard treatment for 
chronic hepatitis C.3  Although lifesaving, hepatitis C drugs such as Harvoni and 
Epclusa (approved in 2016) have list prices exceeding $70,000 per 12-week course of 
treatment, raising concerns about their financial impact on patients and payers.4, 5, 6   
In 2019, after a number of lower-priced brand-name hepatitis C drugs were approved, 
Gileadthe manufacturer of Epclusa and Harvonilaunched authorized generic 
versions of both drugs with the expressed goal of reducing patients out-of-pocket 
costs.7  Authorized generics are identical to approved brand-name drugs but are sold 
without the brand name on their label.8  Preliminary research found that utilization in 
Medicaid and commercial plans shifted to the lower-cost brand-name and authorized 
generic versions; however, a proportionate shift did not occur in Medicare Part D.9   
Because a portion of drug costs in Part D is shared by beneficiaries, many hepatitis C 
patients covered under Medicare could be incurring thousands of dollars more in 
out-of-pocket costs than if they had been prescribed less expensive options.  This 
report provides details about the comparative financial impact of higher-cost 
hepatitis C drugs on the Part D program in 2020 while discussing possible incentives 
for Part D plan sponsors to prefer higher-cost drugs.    
Medicare Prescription Drug Benefit 
The Medicare Prescription Drug, Improvement, and Modernization Act established the 
Medicare Part D program in 2006 to provide Medicare beneficiaries with optional 
outpatient prescription drug coverage.10  Under contracts with the Centers for 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 1    
Medicare & Medicaid Services (CMS), private companies, known as Part D plan 
sponsors, provide competing prescription drug plans to enrolled beneficiaries.11  Plan 
sponsors and CMS share risk for beneficiary drug expenditures.12  Sponsors, pharmacy 
benefit managers, drug manufacturers, and pharmacies negotiate drug prices, 
reimbursement amounts, and rebates privately in Part D.  Federal law prohibits CMS 
from interfering in these negotiations.13      
Part D plans must offer certain minimum prescription drug benefits as specified by 
Federal law, but beneficiary cost-sharing, coverage of specific drugs, and other benefit 
details may vary between plans.14  Sponsors typically develop a list of covered drugs, 
known as a formulary, for their plans.15  Formularies often exclude certain drugs or 
give preference to others by placing them on lower beneficiary cost-sharing tiers than 
other competing therapies that treat the same condition.16   CMS is prohibited from 
requiring a particular formulary for the reimbursement of covered Part D drugs.17  
However, CMS exercises its authority to review Part D plan formularies to ensure that 
drug plans do not substantially discourage enrollment by certain Part D eligible 
individuals.18      
Standard Part D benefit 
Part D plan designs vary, but sponsors must offer coverage that either meets or is 
actuarially equivalent to the parameters of the standard Part D benefit established 
annually by Medicare.19  The standard benefit is composed of the following four 
cost-sharing phases: (1) deductible, (2) initial coverage, (3) coverage gap, and 
(4) catastrophic coverage (see Exhibit 1).  Each year, beneficiaries start at the first 
phase and progress through the successive phases as their pre-rebate drug costs 
increase beyond certain thresholds. 
   
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 2    
Exhibit 1: Each year, beneficiaries progress through the four phases of the 
standard Part D benefit as their prescription drug spending increases. 
Source: 42 CFR  423.104 and OIG analysis of data from CMS, Announcement of Calendar Year (CY) 2020 Medicare 
Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.  
Note: Figures displayed are based on the parameters of the 2020 standard Part D benefit for enrollees without the 
low-income subsidy (LIS).  Benefit details and beneficiary cost-sharing vary in most plans, but all coverage offered by 
Part D sponsors must be actuarially equivalent to the standard benefit.  
*Note: Beneficiary liability in catastrophic coverage is the greater of 5% of a drugs cost or $3.60 for 
generic/multisource drugs and $8.95 for other drugs. 
Part D cost-sharing 
In Part D, most beneficiaries are responsible for a portion of their drug costs.  
Generally, their remaining drug costs are paid by plan sponsors or Medicare 
subsidies.20  Beneficiary cost-sharing obligations, including deductibles, copayments, 
and coinsurance, are collectively referred to as out-of-pocket costs.21  Out-of-pocket 
costs vary depending on specific plan designs, eligibility for the low-income subsidy 
(LIS), the price of the drug being purchased, and the beneficiarys current phase of 
Part D coverage.22  Because beneficiaries cost-sharing amounts are often based on a 
drugs list price, higher-cost drugs typically result in greater out-of-pocket costs.23  
Generally, beneficiaries out-of-pocket spending is not capped in Part D.24   
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 3    
Medicare subsidizes coverage for beneficiaries with incomes up to 150 percent of the 
poverty level through the LIS.25  Other sources such as State pharmaceutical 
assistance programs, charities, or group health plans may reduce beneficiaries out-
of-pocket liability.26    
Cost-sharing for LIS beneficiaries.  Cost-sharing for beneficiaries receiving the LIS
including premiums, deductibles, coinsurance, and copaymentsare fully or partially 
subsidized by Medicare depending on the beneficiarys level of eligibility (see 
Appendix A for details).  The cost-sharing parameters in the coverage gap also 
differnotably, plan sponsors bear no cost-sharing liability and manufacturers are 
not required to discount brand-name drugs (as is required for non-LIS enrollees).27  
Sixty-nine percent of Part D beneficiaries who were treated with hepatitis C drugs in 
2020 received the LIS.28, 29    
Medicare payments to plans 
Medicare pays a portion of its Part D costs through two subsidies provided monthly 
to plan sponsors: (1) direct subsidies and (2) reinsurance subsidies.30  Direct subsidies 
are based on sponsors estimates of the cost to provide Part D coverage.31  
Reinsurance subsidiesthe largest and fastest-growing portion of Part D costs
cover Medicares approximately 80-percent liability for drug costs in catastrophic 
coverage.32, 33   After the end of the year, either sponsors pay overestimates of their 
costs back to Medicare or Medicare provides additional payments for underestimated 
coststhis process is known as reconciliation.34  
Part D rebates  
Plan sponsors or pharmacy benefit managers frequently receive compensation after 
the point of sale that alters the final price they pay for Part D drugs.  Referred to as 
direct and indirect remuneration (DIR), this compensation decreases the costs 
incurred under Part D plans.35  Manufacturer rebatespost-sale price concessions 
received by sponsors or pharmacy benefit managerscomprise a significant portion 
of DIR.  Often, manufacturers offer higher rebates to sponsors and pharmacy benefit 
managers in exchange for favoring their drugs over competing therapies on plan 
formularies.  Rebate amounts are usually calculated as a percentage of a drugs list 
price, meaning higher-cost drugs are typically associated with larger rebates.36 
Rebates can significantly reduce Part D sponsors net spending for drugs; however, 
because rebates are paid to plans after a prescription has been picked up by the 
beneficiary, they do not directly lower beneficiary cost-sharing.37, 38  Although rebates 
do not reduce out-of-pocket costs for individual beneficiaries at the point of sale, 
they are taken into account when CMS calculates beneficiary premiums for the 
following year.39  As a result, savings from rebates and other DIR place downward 
pressure on premiums paid by enrollees and subsidized by Medicare.40, 41, 42  Recent 
policy proposals attempting to pass rebate savings along to Part D beneficiaries at the 
point of sale have faced criticism for their potential to increase premiums.43, 44     
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 4    
Prescription Drug Treatments for Hepatitis C   
Harvoni, the first complete hepatitis C treatment taken via a daily pill approved by the 
U.S. Food and Drug Administration (FDA), entered the market in 2014 with a list price 
of $94,500 for the standard course of treatment.45  In 2016 and 2017, several other 
brand-name hepatitis C drugs reached the market, including Epclusa (with a list price 
of $74,760) and the substantially lower-cost Mavyret (with a list price of $26,400 per 
treatment).46, 47  In 2019, the manufacturer of Epclusa and Harvoni, Gilead Sciences, 
launched authorized generic versions of both drugs nearly a decade before the brand 
patents were set to expire, explaining that the large rebates offered to payers for 
Epclusa and Harvoni were not lowering costs for patients.  The list prices for the 
authorized generic versions ($24,000 per treatment) were roughly 70 percent less than 
those of the brand-name versions.48, 49, 50    
Authorized generics in Medicare Part D 
An authorized generic drug is a brand-name drug that is sold by (or on behalf of) the 
brand-name manufacturer without using the brand-name label.  Unlike generic drugs 
that may differ from brand-name drugs in inactive ingredients, authorized generics 
are the same drug as their corresponding branded products.  A generic drug requires 
FDA approval under an Abbreviated New Drug Application; however, an authorized 
generic can be introduced at any time under the brand-name products existing New 
Drug Application, regardless of patent status.51  Authorized generics are subject to the 
brand-name discount provided by manufacturers in the coverage gap phase of the 
Part D benefit.     
Coverage of hepatitis C drugs in Medicare Part D and Medicaid 
Substituting lower-priced generics that are therapeutically equivalent to higher-cost 
brand-name drugs has become a key strategy for lowering drug spending in the 
U.S.52  However, stakeholders and policy experts have raised concerns that elements 
of Part Ds current programmatic structure potentially provide incentives for sponsors 
to prefer higher-cost drugs with large rebates over less costly alternatives (e.g., 
preferring the brand-name versions of Epclusa and Harvoni over their authorized 
generics).53, 54, 55, 56  In Part D, plan sponsors can use formulary coverage and tier 
placement to encourage Medicare beneficiaries to use certain hepatitis C drugs over 
others in exchange for larger rebates.     
Unlike in Part Dwhere rebates are negotiated among plan sponsors, drug 
manufacturers, and pharmaciesrebate amounts for drugs reimbursed under 
Medicaid are set by statute.57  In addition to these statutory rebates, State Medicaid 
agencies also have authority to negotiate supplemental rebate agreements with drug 
manufacturers.  State Medicaid programs utilize drug placement on their Preferred 
Drug Lists as a tool to negotiate higher supplemental rebates.  Preferred Drug Lists 
create incentives for prescribers and beneficiaries to choose certain drugstypically 
lower-cost drugswhen multiple treatment options are available.58  For example, 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 5    
many States currently list lower-cost drugs such as Mavyret or the Epclusa authorized 
generic as preferred direct-acting antiviral treatments for hepatitis C.59   
Methodology 
Scope  
In this study, OIG examined utilization trends of hepatitis C direct-acting antiviral 
drugs (i.e., Harvoni, Epclusa, their authorized generic versions, and other brand-name 
products) in Medicare Part D and Medicaid in 2019 and 2020.   
Data analysis 
Identifying hepatitis C drugs and categorizing them by cost group.  We identified 
all hepatitis C direct-acting antivirals (hepatitis C drugs) that were approved by FDA as 
of April 29, 2021.  We then removed hepatitis C drugs (1) that were discontinued by 
their manufacturer or (2) for which no Medicare Part D or Medicaid claims were paid 
in 2019 or 2020.  We ranked the remaining hepatitis C drugs by their list prices for a 
typical course of treatment.60  We categorized the drugs into two cost groups: 
(1) lower-cost hepatitis C drugs and (2) higher-cost hepatitis C drugs.  Four drugs 
(including the Mavyret and the authorized generic versions of Epclusa and Harvoni) 
with list prices ranging from approximately $22,000 to $36,000 per treatment 
comprised the lower-cost hepatitis C drug cost group.  The higher-cost hepatitis C 
drug cost group included four drugs with list prices ranging from approximately 
$75,000 to $95,000 per treatment. 
Determining utilization of hepatitis C drugs in Part D and Medicaid.  Using Part D 
prescription drug event (PDE) data, we calculated the proportions of Part D 
beneficiaries who initiated treatment using the authorized generic versions of Epclusa 
and Harvoni in each quarter of 2019 and 2020.  To do this, we divided the number of 
beneficiaries who received the authorized generic versions by the total number of 
beneficiaries who received the brand-name or authorized generic versions for both 
Epclusa and Harvoni.  We repeated this analysis using Transformed Medicaid 
Statistical Information System (T-MSIS) data to determine the same proportions of 
Medicaid beneficiaries.   
Beyond solely comparing Epclusa and Harvoni with their authorized generic versions, 
we also expanded our analysis to include utilization rates among additional lower- 
and higher-cost products.  Specifically, we calculated the proportion of Part D 
beneficiaries who received (1) one of the two lower-cost brand products, (2) one of 
the two lower-cost authorized generic versions, or (3) one of the four higher-cost 
hepatitis C drugs in each quarter of 2019 and 2020 by dividing the number of 
beneficiaries in each of those groups by the total number of beneficiaries who 
received hepatitis C drugs.  We repeated this analysis using T-MSIS data to determine 
the same proportions of Medicaid beneficiaries. 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 6    
Formulary inclusion of hepatitis C authorized generics.  We used formulary data 
obtained from CMS to count the number of Part D plans that included Epclusa or 
Harvoni but not their authorized generics in their 2020 formularies.  We then divided 
the result by the total number of plans that covered Epclusa or Harvoni in 2020.  We 
used the formulary and PDE data to determine the number of beneficiaries who 
initiated treatment using the brand-name version of Epclusa or Harvoni while being 
enrolled in a plan that covered only the brand-name versions and the number of 
beneficiaries who initiated treatment using the using the brand-name versions while 
being enrolled in a plan that covered both the brand-name and authorized generic 
versions. 
Calculating average post-DIR Part D spending per beneficiary for hepatitis C 
drugs.  For both the lower-cost and higher-cost groups, we subtracted total DIR
including manufacturer rebatesreceived by Part D plan sponsors from total gross 
Part D spending to determine net spending per cost group.  We then divided net 
spending by the number of beneficiaries who received higher or lower-cost 
hepatitis C drugs to calculate average post-DIR Part D spending per beneficiary for 
lower-cost and higher-cost hepatitis C drugs.  Because rebate information is 
confidential, our relevant analysis and findings are presented in general terms that 
conceal specific rebate amounts for individual drugs. 
Calculating average beneficiary out-of-pocket spending for hepatitis C drugs.  
We analyzed average beneficiary out-of-pocket spending for higher-cost and 
lower-cost hepatitis C drugs for two groups of beneficiaries: (1) beneficiaries who 
received any form of financial assistance (e.g., the LIS, support from charities or group 
health plans, etc.) and (2) beneficiaries who received no Part D financial assistance.  
We calculated 2020 average beneficiary out-of-pocket spending for lower-cost 
hepatitis C drugs for each of the financial assistance groups by dividing the summed 
patient costs for each group (as reported in the PDE data) by the number of 
beneficiaries in each group who received lower-cost hepatitis C drugs.  We repeated 
this calculation for beneficiaries who received higher-cost hepatitis C drugs.  We 
calculated the difference between average beneficiary out-of-pocket spending for 
higher-cost and lower-cost hepatitis C drugs to estimate potential spending 
reductions for beneficiaries who could switch from higher-cost to lower-cost drugs.  
Calculating spending for hepatitis C drugs in catastrophic coverage.  For 
beneficiaries who entered catastrophic coverage in 2020, we calculated Medicares 
reinsurance amounts after rebates for higher-cost and lower-cost hepatitis C drugs.  
We calculated Medicares average catastrophic coverage payment for a beneficiary 
that received a lower-cost hepatitis C drug by dividing the summed Medicare 
reinsurance costs by the number of beneficiaries who reached the catastrophic 
coverage phase.  We repeated this calculation for beneficiaries who received 
higher-cost hepatitis C drugs.  
Literature review on incentives created by Part Ds program structure.  We 
conducted internet searches to locate and review research conducted by policy 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 7    
experts about Part D programmatic features that may be contributing to differing 
utilization rates for higher-cost hepatitis C drugs in Part D compared to other payers.  
See the Detailed Methodology section for more information. 
Limitations 
Our estimated calculations of potential spending reductions for Medicare and 
beneficiaries if more beneficiaries received lower-cost versions of hepatitis C drugs 
did not account for how drug manufacturers or Part D plan sponsors may respond to 
increased utilization of lower-cost drugs.  We did not review medical records, and 
therefore, our analysis does not account for the possibility that certain beneficiaries 
may have a medical need for a specific hepatitis C drug.  Further, this study did not 
consider how increased use of lower-cost hepatitis C drugs would shift Part D and 
beneficiary financial liability through the Part D benefit phases.  
Standards 
We conducted this study in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200   Background | 8    
FINDINGS 
Through 2019 and 2020, the use of authorized generics to treat 
hepatitis C grew steadily in both Medicare and Medicaid; 
however, Medicare beneficiaries were still much more likely to 
be prescribed the brand-name counterparts 
In January 2019, the manufacturer of Epclusa and Harvoni launched authorized 
generic versions of both drugs with the expressed goal of lowering patient costs.61  In 
the initial quarter of availability, less than 10 percent of Medicare patients and under 
25 percent of Medicaid patients who initiated treatment with Epclusa, Harvoni, or 
their authorized generics received the lower-cost versions.  Through the end of 2020, 
authorized generic use increased in both programs, though Medicare still lagged far 
behind Medicaid (see Exhibit 2). 
Exhibit 2: At the end of 2020, a much greater proportion of Medicaid 
beneficiaries than Medicare beneficiaries received authorized generic 
versions of Epclusa and Harvoni rather than the brand-name versions. 
 
Source: OIG analysis of 2019 and 2020 Medicare Part D PDE records and T-MSIS data.  
Specifically, in the last quarter of 2020, approximately 5,700 Medicaid beneficiaries 
initiated treatment with Epclusa or its identical authorized generic.  More than 
three-quarters (77 percent) of these patients received the lower-cost authorized 
generic option.  In contrast, less than a third (30 percent) of the 3,800 Medicare 
beneficiaries fitting the same criteria received the authorized generic version.  
Similarly, the Harvoni authorized generic was even less likely to be used in place of 
the brand-name version (see Exhibit 2).  Notably, the utilization rate of these two 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 9    
authorized generic versions among Medicare beneficiaries is considerably lower than 
Part Ds 90 percent overall utilization rate of generic drugs.62     
Lack of formulary inclusion among Part D plans is likely a 
primary factor in the relatively low use of authorized generics to 
treat hepatitis C in Medicare 
Stakeholders have expressed concerns that the large rebates associated with 
higher-cost drugs, such as Epclusa and Harvoni, create incentives for plan sponsors to 
prefer drugs with larger rebates on their plan formularies.63, 64   In 2020, nearly half of 
Part D plans covered Epclusa or Harvoni but did not cover the authorized generic 
versions that were specifically launched to reduce patient costs.  The lack of coverage 
may largely explain why so few Medicare beneficiaries received an authorized generic 
to treat hepatitis C in 2020, and instead so many received the more expensive 
brand-name version.  Half of Medicare Part D beneficiaries who initiated treatment 
with Epclusa in 2020 were enrolled in a plan that covered Epclusa but not its 
authorized generic.  Similarly, nearly two-thirds of Part D beneficiaries who received 
their first dose of Harvoni in 2020 were enrolled in a plan that covered the 
brand-name version but not the authorized generic version (see Exhibit 3).   
Exhibit 3: More than half of Part D beneficiaries who initiated treatment 
using the brand-name version of Epclusa or Harvoni in 2020 were enrolled 
in plans that did not cover the authorized generic versionslimiting access 
to less expensive yet identical versions of the same drugs.  
 
Source: OIG analysis of formulary inclusion of authorized generic drugs, Epclusa, and Harvoni, 2022.  
*Note: We removed a small number of beneficiaries from our analysis who initiated treatment using the brand-name 
version of Epclusa or Harvoni in 2020 and were enrolled in a plan that covered neither the brand-name nor the 
authorized generic versions.  
Barriers beyond formulary inclusion, such as prescriber habits 
and drug substitution practices, may also be limiting beneficiary 
access to lower-cost authorized generic versions  
Even among Medicare beneficiaries enrolled in plans that included both the 
brand-name and authorized generic versions of Epclusa or Harvoni, the majority still 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 10    
received the higher-cost option.  Six out of ten beneficiaries who were enrolled in 
such plans initiated treatment with Epclusa rather than its authorized generic, as did 
two-thirds of beneficiaries who received a version of Harvoni (see Exhibit 4).  In a 
number of cases, this may have been the result of specific instructions from the 
prescriber.  In 2020, approximately one in five prescriptions for Epclusa or Harvoni 
paid under Medicare included a dispense as written note from the prescriber 
prohibiting the pharmacist from substituting the equivalent authorized generic 
version. 
Even in the absence of prescriber instruction, pharmacy substitution practices vary 
due to State laws.  Although some States require pharmacists to provide a generic 
equivalent (if available) in place of the prescribed brand, generic substitution is not a 
mandatory practice in most States. 65, 66 
Exhibit 4: A majority of Part D beneficiaries who were enrolled in plans that 
covered both the brand-name and authorized generic versions of Epclusa or 
Harvoni were treated with the higher-cost brand-name versions in 2020.  
 
Source: OIG analysis of formulary inclusion of authorized generic drugs, Epclusa, and Harvoni, 2022.  
In addition to being well ahead of Medicare in the adoption of 
authorized generics to treat hepatitis C, Medicaid utilization of 
lower-cost brands far surpassed Medicare utilization 
Prior to the introduction of authorized generics, another brand-name product with a 
substantially lower list price than Epclusa and Harvoni was already on the market and 
widely prescribed in Part D and Medicaid.67  Mavyretapproved in 2017 and 
marketed as the only 8-week cure for all six basic genotypes of hepatitis C for those 
new to treatmenthad a list price of $26,400 per treatment in 2020approximately 
one-third to one-fourth that of Epclusa and Harvoni.68, 69  Because Mavyret is 
approved to treat all genotypes of hepatitis C, the drug is widely recognized as a 
potentially lower-cost alternative to higher-cost brands.70, 71, 72   
However, as was the case with authorized generics, Medicare beneficiaries were much 
less likely to utilize lower-cost brand-name options, including Mavyret.  During the 
first quarter of 2019 (the same quarter in which the authorized generics reached the 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 11    
market), 78 percent of Medicaid beneficiaries who initiated treatment with a 
hepatitis C drug were already receiving a lower-cost brand-name version compared to 
only 42 percent of Medicare Part D beneficiaries (see Exhibit 5).  In subsequent 
quarters, the increased utilization of authorized generics in both programs often came 
at the expense of the lower-cost brands rather than Epclusa or Harvoni.  By the end of 
2020, utilization of these lower-cost brand-name hepatitis C drugs decreased to 
54 percent and 34 percent in Medicaid and Medicare, respectively.  In total, the 
availability of authorized generics resulted in a net decrease of just 6 percentage 
points in the number of beneficiaries receiving higher-cost hepatitis C drugs in both 
Medicare and Medicaid (see Appendix B).   
Exhibit 5: The introduction of authorized generics slightly reduced patient 
utilization of higher-cost brand-name drugs in Medicare and Medicaid, but 
most of their growth came from reduced utilization of lower-cost 
brand-name drugs. 
 Higher-cost 
brand-name 
drugs 
 Lower-cost 
authorized 
generic drugs 
 Lower-cost 
brand-name 
drugs 
 
 
 
Source: OIG analysis of 2019 and 2020 Medicare Part D PDE records and T-MSIS data. 
Note: Total of percentages for each quarter may not equal 100 due to rounding.  
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 12    
The large rebates offered by manufacturers for higher-cost 
hepatitis C drugs benefit plan sponsors but provide little relief 
to beneficiaries who received the drugs or the Medicare 
program 
Large rebates provided by manufacturers for higher-cost drugs covered under Part D 
allow plan sponsors to recoup much of their gross spending.  In turn, lower net 
spending allows plans to offer lower premiums and attract enrollees.73, 74  However, 
policy experts have raised concerns that the reduction in net sponsor spending for 
higher-cost drugs caused by large rebates has weakened sponsors incentives to 
negotiate lower prices.75    
In 2020, manufacturer rebatesamong other DIR received by plan sponsors after the 
point of salesignificantly reduced the difference in net Part D spending per 
beneficiary between higher-cost and lower-cost hepatitis C drugs.  On average, gross 
Part D spending for the four higher-cost hepatitis C drugs used in 2020 exceeded 
$65,000 per beneficiary, compared to roughly $25,000 for the four lower-cost 
hepatitis C drugs.  Once DIRprimarily in the form of rebatesis taken into account, 
net expenditures for the higher-cost drugs averaged less than $30,000 per beneficiary, 
a reduction of more than 50 percent.  In contrast, DIR for lower-cost versions was 
much smaller, resulting in a net cost of $21,000 per beneficiary.  In other words, after 
rebates and other post-sale price concessions, the net cost difference between 
higher-cost and lower-cost hepatitis C drugs plummeted from more than $40,000 per 
patient to less than $10,000 per patient.   
Because beneficiary cost-sharing is based on pre-rebate prices, 
the use of higher-cost hepatitis C drugs in Part D led to 
thousands of dollars in additional costs for some Medicare 
beneficiaries 
Twenty-six percent of Part D beneficiaries who were treated with hepatitis C drugs in 
2020 did not receive the LIS or other assistance (e.g., support from State 
pharmaceutical assistance programs, charities, group health plans, etc.).  Because 
cost-sharing under Part D is based on pre-DIR drug prices, beneficiaries without any 
form of assistance who received a higher-cost drug to treat hepatitis C paid almost 
70 percent more in out-of-pocket costs over their course of treatment than similar 
beneficiaries who received lower-cost drugs ($5,300 versus $3,100, see Exhibit 6).   
   
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 13    
Exhibit 6: Medicare Part D beneficiaries who did not receive financial 
assistance paid, on average, $2,200 more out of pocket for higher-cost 
hepatitis C drugs. 
 
Source: OIG analysis of 2020 Medicare Part D PDE records. 
Additionally, use of higher-cost hepatitis C drugs contributed to higher Medicare 
spending on cost-sharing subsidies for LIS beneficiaries.  Nearly three-quarters of the 
Medicare Part D beneficiaries who received hepatitis C drugs in 2020 were eligible for 
the LIS or other assistance that reduced their out-of-pocket costs.  On average, the 
beneficiaries who received the LIS or other assistance paid nominal amounts for their 
hepatitis C drugs, regardless of whether they were prescribed higher-cost or 
lower-cost versions (see Appendix C).  However, although differences in out-of-pocket 
costs between higher-cost and lower-cost versions may be negligible for these 
individual beneficiaries, the LIS is by definition a subsidy and is ultimately funded by 
taxpayers.   
After rebates, Medicares average catastrophic coverage payment 
for a beneficiary prescribed a higher-cost hepatitis C drug was 
nearly double that of a beneficiary prescribed a lower-cost drug 
Given the high cost of treatment, nearly all Part D beneficiaries receiving hepatitis C 
drugs entered catastrophic coverage in 2020, at a cost of nearly $539 million to 
Medicare.76  The portion of total hepatitis C drug costs that were incurred in 
catastrophic coveragethe benefit phase in which Medicares liability is 80 percent
was much larger for beneficiaries taking higher-cost versions.  After rebates and any 
other applicable DIR, Medicares final catastrophic coverage payments for higher-cost 
hepatitis C drugs totaled $347 million in 2020, compared to only $192 million for 
lower-cost versions, despite a similar number of beneficiaries reaching catastrophic 
coverage in each cost group (see Exhibit 7).77  Medicares average catastrophic 
coverage payment for a beneficiary prescribed a higher-cost drug to treat hepatitis C 
was more than $20,000nearly double that of a beneficiary prescribed a lower-cost 
drug which averaged slightly more than $11,000.  
Plans 15-percent financial obligation in the catastrophic coverage phase is much 
lower than Medicares 80 percent.  The reduced plan liability in catastrophic coverage 
may lead sponsors to prefer higher-cost drugs that push beneficiaries into 
catastrophic coverage fasterespecially because higher-cost drugs are typically 
associated with larger rebates.78, 79 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 14    
Exhibit 7: After rebates, Medicare reinsurance spending was $155 million 
more for higher-cost hepatitis C drugs despite a similar number of 
beneficiaries reaching catastrophic coverage in each cost group. 
 
Source: OIG analysis of 2020 Medicare Part D PDE records and DIR data.  
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Findings | 15    
CONCLUSION AND RECOMMENDATIONS 
In the last decade, a new class of drugs have revolutionized treatment of chronic 
hepatitis C.  These modern hepatitis C drugs have proved to be life-saving; however, 
their high costs have financially strained patients and payers.  Although less expensive 
hepatitis C drugs have gradually entered the market, almost half of Medicare 
beneficiaries continued to use higher-cost options in 2020, a rate several times higher 
than for Medicaid.  These discrepancies were reflected in lower Medicare utilization 
rates for both the authorized generic versions of Epclusa and Harvonilower-cost 
versions marketed without the brand labelas well as for lower-cost brand-name 
drugs that treat the same hepatitis C genotypes.  Many Part D plans did not include 
authorized generic versions in their formularies, limiting beneficiaries ability to access 
less costly treatment options.   
Certain factors related to Part Ds programmatic structure help explain why plan 
sponsors may prefer higher-cost versions.  Higher-cost drugs push beneficiaries into 
catastrophic coverage earlier where plans financial obligation is only 15 percent
much lower than Medicares 80 percent.  Additionally, the large rebates provided by 
manufacturers for higher-cost hepatitis C drugs can significantly reduce Part D 
sponsors net spending.  The savings plans receive from rebates can be used by plans 
to offer Medicare beneficiaries lower premiums and attract more enrollees.   
Although large rebates benefit plans and place downward pressure on premiums, 
they do little to alleviate the extra costs paid by beneficiaries and Medicare for 
higher-cost hepatitis C drugs.  Medicare beneficiaries who were not eligible for the LIS 
or other financial assistance would have spent an average of $2,200 less in out-of-
pocket costs had they used lower-cost hepatitis C drugs.80  Further, use of higher-cost 
versions among beneficiaries who received the LIS increased Medicares 
taxpayer-funded subsidy spending.  Even after rebates, Medicare paid $155 million 
more in catastrophic coverage reinsurance payments for higher-cost hepatitis C 
drugsspending that could have been reduced if more beneficiaries had used 
lower-cost options. 
OIG recognizes that CMSs authorities to address the issues raised in this report are 
limited.  As outlined in the Social Security Act, CMS is strictly prohibited from 
interfering with the negotiations between drug manufacturers, pharmacies, and Part D 
plans.  In addition, the agency may not require a particular formulary for the 
reimbursement of covered Part D drugs.  However, given the substantial costs of 
certain widely used hepatitis C drugs for beneficiaries and Medicare, OIG believes 
CMS can still take a number of limited steps to promote the use of lower-cost 
versionssome of which are identical to the brand-name drug product.  Therefore, 
we recommend thatto reduce out-of-pocket costs for beneficiaries and combat 
rising drug spending in Medicare Part DCMS:   
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Conclusion and Recommendations | 16    
Encourage Part D plans to increase access to and use of the 
authorized generic versions of Epclusa and Harvoni, within the 
authorities granted under statute 
CMS should encourage Part D plans to increase access to and use of the authorized 
generic versions of Epclusa and Harvoni within its authority.  For example, CMS could:  
  Develop a voluntary innovation model through its Center for Medicare and 
Medicaid Innovation that seeks to increase use of authorized generic 
hepatitis C drugs over brand-name versions.  In 2021, CMS concluded the 
Part D Payment Modernization Model which attempted to decrease Part D 
program spending by creating new incentives for program participants to 
choose drugs with lower list prices.81  Acknowledging the complexities of 
these voluntary models, CMS could redevelop aspects of the 2021 model, such 
as allowing participating sponsors to reduce or eliminate beneficiary 
copayments for lower-cost drugs, into a new demonstration focused on 
substituting authorized generics versions of Epclusa and Harvoni for their 
brand-name versions and possibly increasing use of other lower-cost 
brand-name hepatitis C drugs.  While the Center for Medicare and Medicaid 
Innovations models generally do not focus on a specific drug used for a 
limited time period, CMS could evaluate whether developing such a model 
would be appropriate given that Part D and its beneficiaries spent more than 
$1.6 billion on hepatitis C drugs in 2020.  
  Monitor Part D plans submitted formularies to examine coverage trends of 
the relatively new authorized generic versions of Epclusa and Harvoni.  
Specifically, CMS could consider determining whether formulary coverage of 
the authorized generic versions increases as they become more entrenched in 
the hepatitis C treatment market.  When plans include the brand-name 
versions but elect not to cover the identical yet significantly less expensive 
authorized generic versions, enrollees are limited in their ability to access the 
more affordable authorized generic versions.  As part of its formulary review 
process, CMS could therefore consider identifying formularies that continue to 
include the brand-name versions while excluding the authorized generic 
versions.  The results of monitoring this coverage could inform CMSs efforts 
towithin its authorityencourage access to authorized generic versions. 
Pursue additional strategiessuch as educating providers and 
pharmaciesto increase access to and use of lower-cost 
hepatitis C drugs in Medicare Part D  
CMS should pursue strategies to increase beneficiary access to and use of lower-cost 
hepatitis C drugs in Part D.  For example, CMS could educate providers and 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Conclusion and Recommendations | 17    
pharmaciesas frontline workers interacting with beneficiaries who will be treated 
with these drugson the availability, safety, and value of the authorized generic 
versions of Epclusa and Harvoni.  Specifically, the Part D beneficiaries enrolled in plans 
that cover both the brand-name and authorized generic versions of Epclusa or 
Harvoni represent the patient population that could gain the most from educated 
providers and pharmacists discussing less expensive but pharmaceutically identical 
options.  In addition, even beneficiaries enrolled in plans that lack authorized generic 
coverage may benefit from their providers discussing other lower-cost brand-name 
treatment options.  To increase use of lower-cost hepatitis C drugs in Medicare, both 
providers and patients must be well informed of the availability and safety of 
lower-cost options such as authorized generics.  Pharmacies must also be aware of 
and stock lower-cost options. 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Conclusion and Recommendations | 18    
AGENCY COMMENTS AND OIG RESPONSE  
CMS concurred with both of OIGs recommendations.   
In response to our first recommendation, CMS stated that it is committed to taking 
action, as appropriate, to increase access to and use of lower-cost drug products, 
including authorized generics.  CMS indicated that it intends to examine how its 
Center for Medicare and Medicaid Innovation models could be used to test methods 
to lower beneficiary and program spending on drugs and incentivize the use of 
authorized generic drugs.  Regarding OIGs second suggestion for CMS to examine 
coverage trends of the authorized generic versions of Epclusa and Harvoni among 
Part D formularies, CMS stated that its authority to review Part D plan formularies 
centers on ensuring that plans provide access to medically necessary treatments and 
do not discriminate against particular types of beneficiaries.  Because authorized 
generic drugs are the same drugs as their brand-name counterparts (without the 
brand-name label), CMS indicated that monitoring whether or not they are included 
on formularies would not have an effect on access to medically necessary treatments 
nor allow CMS to take action within the authorities granted under statute.  OIG 
encourages CMS to continue to explore appropriate actions the agency could take to 
encourage Part D plan sponsors to increase access to and use of lower-cost 
hepatitis C drugs.    
In response to our second recommendation, CMS stated that it will look to pursue 
additional strategies to increase access to and use of lower-cost drugs, including 
hepatitis C authorized generics, in Part D.     
OIG appreciates CMSs commitment to work within its authority to address both cost 
and access concerns to ensure that Medicare beneficiaries have access to high-quality 
and affordable health care. 
For the full text of CMSs comments, see the Agency Comments appendix at the end 
of the report. 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Agency Comments and OIG Response | 19    
DETAILED METHODOLOGY 
Identifying hepatitis C drugs.  We first obtained all National Drug Codes (NDCs) 
associated with hepatitis C direct-acting antivirals (hereinafter referred to as 
hepatitis C drugs) approved by FDA as of April 29, 2021, from manufacturer 
websites.  We then used NDC data and Medicare Part D/Medicaid claims data to 
identify FDA-approved hepatitis C drugs for which claims were paid under Medicare 
or Medicaid in 2019 or 2020.  We removed NDCs from our list of hepatitis C drugs 
that have been discontinued or for which no Medicare or Medicaid claims were paid 
in 2019 or 2020.  
Categorizing hepatitis C drugs by cost group.  We ranked the hepatitis C drugs for 
which claims were paid under Medicare Part D or Medicaid in 2019 or 2020 by their 
list prices for a typical course of treatment.  To do this, we obtained quarterly list 
prices (i.e., wholesale acquisition costs) per pill for each hepatitis C drug from the First 
Databank drug compendia.  Using manufacturer websites, we then determined that 
the most common length of treatment for the hepatitis C drugs in our study was 
12 weeks, except for Mavyret which has a typical treatment length of 8 weeks.  We 
then multiplied the list prices per pill by the number of pills required for a typical 
course of treatment to determine the cost per treatment for each hepatitis C drug.  
We categorized the drugs into two groups according to their cost per treatment: 
(1) lower-cost hepatitis C drugs and (2) higher-cost hepatitis C drugs.  Four drugs 
(including the authorized generic versions of Harvoni and Epclusa) with treatment list 
prices ranging from approximately $22,000 to $36,000 comprised the lower-cost 
hepatitis C drug cost group.  The higher-cost hepatitis C drug cost group included 
four drugs with list prices ranging from approximately $75,000 to $95,000 per 
treatment. 
Determining utilization of hepatitis C drugs in Part D and Medicaid.  Every time a 
beneficiary fills a prescription in Part D, a sponsor must submit a prescription drug 
event (PDE) record to CMS.  We used PDE data to count the number of Part D 
beneficiaries who initiated hepatitis C treatment (i.e., received the first dose of a 
hepatitis C drug) in 2019 and 2020.  For a given analysis year, we removed 
beneficiaries who had a claim for a hepatitis C drug in the prior year (i.e., they were 
not initiating treatment in our analysis year).  By counting beneficiaries initial 
treatment, we controlled for potential differences in treatment length (e.g., 8 weeks 
vs. 12 weeks) and differences in prescribing (e.g., 30-day supply vs. 90-day supply).  
We also removed beneficiaries who used more than one hepatitis C drug (i.e., 
switched hepatitis C drugs), representing 2 percent of beneficiaries in both 2019 and 
2020.  
We calculated the proportions of Part D beneficiaries who initiated treatment using 
the authorized generic versions of Epclusa and Harvoni in each quarter of 2019 and 
2020 by dividing the number of beneficiaries who received the authorized generic 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Detailed Methodology | 20    
versions by the total number of beneficiaries who received the brand-name or 
authorized generic versions for both Epclusa and Harvoni.  We repeated this analysis 
using T-MSIS data to determine the same proportions of Medicaid beneficiaries.   
Beyond solely comparing Epclusa and Harvoni with their authorized generic versions, 
we also expanded our analysis to include utilization rates among additional 
lower- and higher-cost products.  Specifically, we calculated the proportion of Part D 
beneficiaries who received (1) one of the two lower-cost brand products, (2) one of 
the two lower-cost authorized generic versions, or (3) one of the four higher-cost 
hepatitis C drugs in each quarter of 2019 and 2020 by dividing the number of 
beneficiaries in each of those groups by the total number of beneficiaries who 
received hepatitis C drugs.  We repeated this analysis using T-MSIS data to determine 
the same proportions of Medicaid beneficiaries. 
Formulary inclusion of hepatitis C drugs.  To determine formulary inclusion trends 
of hepatitis C drugs, we counted the number of Part D plans that included Epclusa or 
Harvoni but not their authorized generics in their formularies in 2020.  We then 
divided the result by the total number of plans that covered Epclusa or Harvoni in 
2020 to calculate the proportion of total plans that covered Epclusa or Harvoni 
without covering their authorized generic versions.  We used the formulary and PDE 
data to determine the number of beneficiaries who initiated treatment using the 
brand-name version of Epclusa or Harvoni while being enrolled in a plan that covered 
only the brand-name versions as well as the number of beneficiaries who initiated 
treatment using the brand-name versions while being enrolled in a plan that covered 
both the brand-name and authorized generic versions. 
Calculating average post-DIR Part D spending per beneficiary for hepatitis C 
drugs.  We obtained 2020 direct and indirect remuneration (DIR) data from CMSs 
Health Plan Management System.  For both the lower-cost and higher-cost 
hepatitis C drugs cost groups, we subtracted total DIRincluding manufacturer 
rebatesreceived by Part D plan sponsors from total gross Part D spending to 
determine net spending per cost group.  We then divided net spending by the 
number of beneficiaries who received lower-cost or higher-cost hepatitis C drugs to 
calculate average post-DIR Part D spending per beneficiary for lower-cost and higher-
cost hepatitis C drugs.  Because rebate information is confidential, our relevant 
analysis and findings are presented in general terms that conceal specific rebate 
amounts for individual drugs. 
Calculating average beneficiary out-of-pocket spending for hepatitis C drugs.  
We analyzed average beneficiary out-of-pocket spending for higher-cost and lower-
cost hepatitis C drugs for two groups of beneficiaries: (1) beneficiaries who received 
any form of financial assistance (e.g., the low-income subsidy, support from charities 
or group health plans, etc.) and (2) beneficiaries who received no Part D financial 
assistance.  We calculated 2020 average beneficiary out-of-pocket spending for 
lower-cost hepatitis C drugs for each of the financial assistance groups by dividing the 
summed patient costs for each group (as reported in the PDE data) by the number of 
beneficiaries in each group who received lower-cost hepatitis C drugs.  We repeated 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Detailed Methodology | 21    
this calculation for beneficiaries who received higher-cost hepatitis C drugs.  See 
Appendix C for additional details on the financial assistance groups composition and 
out-of-pocket costs.  We calculated the difference between average beneficiary out-
of-pocket spending for higher-cost and lower-cost hepatitis C drugs to estimate 
potential spending reductions for beneficiaries who could switch from higher-cost to 
lower-cost drugs. 
Calculating spending for hepatitis C drugs in catastrophic coverage.  For 
beneficiaries who entered catastrophic coverage in 2020, we calculated Medicares 
reinsurance amounts in catastrophic coverage after rebates for higher-cost and 
lower-cost hepatitis C drugs.  We calculated Medicares average catastrophic 
coverage payment for a beneficiary that received a lower-cost hepatitis C drug by 
dividing the summed Medicare reinsurance costs by the number of beneficiaries who 
reached the catastrophic coverage phase.  We repeated this calculation for 
beneficiaries who received higher-cost hepatitis C drugs.  
Literature review on incentives created by Part Ds program structure.  We 
conducted internet searches to locate and review research conducted by policy 
experts about Part D programmatic features (e.g., financial incentives created by 
rebates) that may be contributing to differing utilization rates for higher-cost 
hepatitis C drugs in Part D compared to other payers. 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Detailed Methodology | 22    
APPENDICES 
Appendix A: 2020 Medicare Part D and beneficiary drug cost 
responsibility by coverage phase for beneficiaries who qualify 
for the LIS 
  Low-Income Subsidy (LIS)-Eligible Beneficiaries 
  Full-Subsidy Eligible  Partial-Subsidy Eligible 
Coverage Phase  Paid by Part D*  Paid by Enrollee  Paid by Part D*  Paid by Enrollee 
Deductible  $435  $0  $346  $89 
Initial Coverage  100% less enrollee  $0-$8.95  85%  15% 
cost-sharing 
Coverage Gap  100% less enrollee  $0-$8.95  85%  15% 
cost-sharing 
Catastrophic  100%  $0  100% less enrollee  $3.60-$8.95 
Coverage  cost-sharing 
 
Source: 42 CFR  423.782 and OIG analysis of data from CMS, Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation 
Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. 
*Note: This total includes plan drug cost responsibility and the LIS.  
 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix A | 23    
Appendix B: Utilization trends of beneficiaries who initiated 
treatment with a lower-cost hepatitis C drug in Medicare Part D 
and Medicaid, 2019-2020 
 
Source: OIG analysis of 2020 Medicare Part D PDE records and T-MSIS data.  
Note: The percentage of beneficiaries who initiated treatment with a lower-cost hepatitis C drug in Medicare and Medicaid 
presented in this Appendix may differ from the sum of the two lower-cost drug categories in Exhibit 5 due to rounding.  
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix B | 24    
Appendix C: Average 2020 beneficiary out-of-pocket costs for 
higher-cost versus lower-cost hepatitis C drugs among 
beneficiaries receiving varying levels of financial assistance 
Beneficiaries whose out-of-pocket costs were not reduced by financial assistance 
 
 
Number of beneficiaries  Average out-of-pocket costs 
 
Taking higher-cost 
4,563  $5,351 
hepatitis C drugs 
Taking lower-cost 
4,688  $3,130 
hepatitis C drugs 
 
 
Beneficiaries whose out-of-pocket costs were reduced by any form of financial  
assistance  
 
 
Types of financial assistance in this category include the low-income subsidy (LIS), State pharmaceutical 
assistance programs, charities, group health plans, etc. 
 
Number of beneficiaries  Average out-of-pocket costs 
 
Taking higher-cost 
13,189  $75 
hepatitis C drugs 
Taking lower-cost 
12,525  $50 
hepatitis C drugs 
 
 
Beneficiaries whose out-of-pocket costs were reduced by the LIS only 
 
 
We examined this category of beneficiaries in addition to the above category, as the LIS was the primary 
form of financial assistance received by Medicare beneficiaries who were treated for hepatitis C in 2020. 
 
  Number of beneficiaries  Average out-of-pocket costs 
Taking higher-cost 
12,099  $40 
hepatitis C drugs 
Taking lower-cost 
11,657  $28 
hepatitis C drugs 
 
Source: OIG analysis of 2020 Medicare Part D PDE records.
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix C | 25    
Appendix D: Agency Comments 
Following this page are the official comments from CMS. 
   
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix D | 26    
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix D | 27    
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Appendix D | 28   ACKNOWLEDGMENTS AND CONTACT 
Acknowledgments 
Michael Kvassay served as the team leader for this study, and Kasey Memphis served 
as the lead analyst.  Others in the Office of Evaluation and Inspections who conducted 
the study include Bahar Adili.  Office of Evaluation and Inspections headquarters staff 
who provided support include Althea Hosein, Christine Moritz, Michael Novello, and 
Sarah Swisher.  
We would also like to acknowledge the contributions of other Office of Inspector 
General staff, including Amber Jessup and Jessica Swanstrom.   
This report was prepared under the direction of Dave Tawes, Regional Inspector 
General for Evaluation and Inspections in the Baltimore regional office, Heather 
Barton, Deputy Regional Inspector General, and Louise Schoggen, Assistant Regional 
Inspector General. 
Contact 
To obtain additional information concerning this report, contact the Office of Public 
Affairs at Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found 
on the OIG website at oig.hhs.gov. 
Office of Inspector General 
U.S. Department of Health and Human Services 
330 Independence Avenue, SW 
Washington, DC 20201 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher 
Medicare and Beneficiary Spending, OEI-BL-21-00200  Acknowledgments and Contact | 29   
ABOUT THE OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 
95-452, as amended, is to protect the integrity of the Department of Health and 
Human Services (HHS) programs, as well as the health and welfare of beneficiaries 
served by those programs.  This statutory mission is carried out through a nationwide 
network of audits, investigations, and inspections conducted by the following 
operating components: 
The Office of Audit Services (OAS) provides auditing services for HHS, 
either by conducting audits with its own audit resources or by overseeing audit work 
done by others.  Audits examine the performance of HHS programs and/or its 
grantees and contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments of HHS programs and operations.  
These audits help reduce waste, abuse, and mismanagement and promote economy 
and efficiency throughout HHS. 
The Office of Evaluation and Inspections (OEI) conducts national 
evaluations to provide HHS, Congress, and the public with timely, useful, and reliable 
information on significant issues.  These evaluations focus on preventing fraud, waste, 
or abuse and promoting economy, efficiency, and effectiveness of departmental 
programs.  To promote impact, OEI reports also present practical recommendations 
for improving program operations. 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries.  With investigators working in all 50 States and the District of Columbia, 
OI utilizes its resources by actively coordinating with the Department of Justice and 
other Federal, State, and local law enforcement authorities.  The investigative efforts 
of OI often lead to criminal convictions, administrative sanctions, and/or civil 
monetary penalties. 
The Office of Counsel to the Inspector General (OCIG) provides 
general legal services to OIG, rendering advice and opinions on HHS programs and 
operations and providing all legal support for OIGs internal operations.  OCIG 
represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty 
cases.  In connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements.  OCIG renders advisory opinions, issues compliance program 
guidance, publishes fraud alerts, and provides other guidance to the health care 
industry concerning the anti-kickback statute and other OIG enforcement authorities.  
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  About the Office of Inspector General | 30    
ENDNOTES 
 
1 Office of Inspector General (OIG) analysis of Medicare Part D drug spending for direct-acting antivirals used to treat chronic 
hepatitis C infections.   
2 Although hepatitis C is a short-term illness for some people, most people infected with the hepatitis C virus develop a 
long-term, chronic infection.  The hepatitis C drugs discussed in this report are approved to treat chronic hepatitis C.  Centers 
for Disease Control and Prevention (CDC), Hepatitis C Information, July 28, 2020.  Accessed at 
https://www.cdc.gov/hepatitis/hcv/index.htm on February 10, 2021. 
3 Before direct-acting antivirals, hepatitis C was treated for decades with painful shots of interferon and a pill called ribavirin.  
These treatments were associated with only a 50-percent cure rate.  Treatment lasted 48 weeks and had adverse and often 
intolerable side effects.  Harvoni was the first all oral hepatitis C treatment approved by the U.S. Food and Drug 
Administration (FDA).  WebMD, Hepatitis C Treatments, October 25, 2021.  Accessed at 
https://www.webmd.com/hepatitis/understanding-hepatitis-c-treatment on March 15, 2022.  Pollack, A., Harvoni, a 
Hepatitis C Drug From Gilead, Wins F.D.A. Approval, October 10, 2014, New York Times.  Accessed at 
https://www.nytimes.com/2014/10/11/business/harvoni-a-hepatitis-c-drug-from-gilead-wins-fda-approval.html on April 5, 
2021. 
4 A manufacturers list price (sometimes referred to as the wholesale acquisition cost) for a drug or biological does not 
include prompt pay or other discounts, rebates, or reductions in price. 
5 Kalidindi, Y., et al., Association of Direct-Acting Antiviral Treatment With Mortality Among Medicare Beneficiaries With 
Hepatitis C, JAMA Network Open Volume 3, Number 7, July 2020.   
6 Silverman, E., FDA Approves a Gilead pill that is first to treat all forms of hepatitis C, June 28, 2016, STAT.  Accessed at 
https://www.statnews.com/pharmalot/2016/06/28/fda-approves-gilead-hepatitis-c/ on March 17, 2022. 
7 Gilead Sciences, Inc., A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV, 
Company Statement, September 24, 2018.  Accessed at https://www.gilead.com/news-and-press/company-
statements/authorized-generics-for-hcv on March 16, 2022. 
8 By identical, we mean thatother than the fact that an authorized generic does not have the brand name on its labelan 
authorized generic version of a drug is the exact same drug product as the brand-name drug, according to FDA.  However, 
authorized generic versions of a tablet or capsule may not be identical in appearance to the brand-name version (e.g., a 
different color or marking).  FDA, FDA List of Authorized Generic Drugs.  Accessed at 
https://www.fda.gov/drugs/abbreviated-new-drug-application-anda/fda-list-authorized-generic-drugs on August 8, 2022. 
9 IQVIA US Market Access Strategy Consulting analysis found that commercial payers and Medicaid quickly shifted away from 
the brand-name versions of Harvoni and Epclusa to their significantly cheaper authorized generic versions, or to another 
cheaper hepatitis C drug called Mavyret.  Fein, A., Why Part D Plans Prefer High List Price Drugs That Raise Costs for Seniors, 
January 22, 2020, Drug Channels Blog.  Accessed at https://www.drugchannels.net/2020/01/why-part-d-plans-prefer-high-
list-price.html on July 7, 2021.  
10 Section 101, The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P.L. No. 108-173; Social 
Security Act  1860D-1(a). 
11 Part D sponsors can offer prescription drug coverage under stand-alone prescription drug plans (PDPs) and/or Medicare 
Advantage prescription drug plans (MA-PDs).  Social Security Act  1860D-1(a). 
12 Congressional Research Service (CRS), Medicare Part D Prescription Drug Benefit, December 2020.   
13 Social Security Act  1860D-11(i)(1). 
14 Social Security Act  1860D-2. 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Endnotes | 31    
 
15 42 CFR  423.4.    
16 Preferred drug means a covered Part D drug on a Part D plan's formulary for which beneficiary cost-sharing is lower than 
for a nonpreferred drug on the plan's formulary.  42 CFR  423.100.  In addition to formulary inclusion/placement, plans rely 
on other utilization management tools, such as prior authorization requirements and step therapy, to limit use of certain 
drugs. 
17 Social Security Act  1860D-11(i)(2). 
18 Social Security Act  1860D-11(e)(2)(D)(i), 42 CFR  423.120(b)(2), and Chapter 6, Section 30.2.7, of the Medicare 
Prescription Drug Benefit Manual. 
19 42 CFR  423.104(c)-(e). 
20 42 CFR  423.2325.  Brand-name and authorized generic drug costs are offset in the coverage gap by the 70 percent 
discount manufacturers are required to provide for non-LIS beneficiaries in the coverage gap.   
21 Copayments are fixed payment amounts made by a beneficiary for a drug.  Coinsurance payments are generally based on a 
percentage of the drugs cost.  Premium costs are not included in out-of-pocket costs. 
22 CRS, Medicare Part D Prescription Drug Benefit, op cit. 
23 CMS, Medicare Part D  Direct and Indirect Remuneration (DIR), Fact Sheet, January 19, 2017.  Accessed at 
https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir on November 30, 2021. 
24 Out-of-pocket spending is capped for beneficiaries receiving the full LIS.  CRS, Medicare Part D Prescription Drug Benefit, 
op. cit. 
25 42 CFR  423.773(a)-(b).  Part D beneficiaries who are eligible for Medicaid are automatically eligible for the LIS regardless 
of income level.  42 CFR  423.773(c)(1).  
26 CRS, Medicare Part D Prescription Drug Benefit, op cit. 
27 Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Medicare Payment Policy, Chapter 14: The 
Medicare prescription drug program (Part D): Status report, March 2020.  
28 OIG analysis of 2020 Part D prescription drug event data.  
29 In 2021, approximately 1 in 4 Medicare Part D enrollees received assistance through the LIS program.  Cubanski, J., et al., 
Key Facts About Medicare Part D Enrollment, Premiums, and Cost Sharing in 2021, June 8, 2021, Kaiser Family Foundation.  
Accessed at https://www.kff.org/medicare/issue-brief/key-facts-about-medicare-part-d-enrollment-premiums-and-cost-
sharing-in-2021/ on March 16, 2022. 
30 Medicare also makes low-income cost-sharing subsidy payments and risk-sharing payments.  
31 See Social Security Act  1860D-15(a)(1) for directy subsidy calculation details. 
32 42 CFR  423.329(c) 
33 CRS, Medicare Part D Prescription Drug Benefit, op cit. 
34 42 CFR  423.343 
35 42 CFR  423.308 
36 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, June 2020.   
37 CMS, Medicare Part D  Direct and Indirect Remuneration (DIR), op cit. 
38 United States Government Accountability Office (GAO), Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to 
Manage Drug Expenditures and Utilization, GAO-19-498, July 2019. 
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Endnotes | 32    
 
39 Part D plan sponsors must factor expected DIRincluding rebatesfor the upcoming payment year into their plan bids 
which are used by CMS to calculate premiums.  In other words, projected DIR reduces sponsors estimated costs to provide 
the Part D benefit, which in turn reduces premiums. 
40 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op. cit. 
41 Lieberman, S., et al., Sharing Drug Rebates With Medicare Part D Patients: Why And How, September 14, 2020, Health 
Affairs Forefront.  Accessed at https://www.healthaffairs.org/do/10.1377/hblog20200911.841771/full/ on March 16, 2022. 
42 CMS, Medicare Part D  Direct and Indirect Remuneration (DIR), op cit. 
43 Congressional Budget Office (CBO), Incorporating the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical 
Rebates in CBOs Budget ProjectionsSupplemental Material for Updated Budget Projections: 2019 to 2029, May 2019.   
44 CMS, Proposed Safe Harbor Regulation Impact, August 3, 2018.  Accessed at https://www.cms.gov/Research-Statistics-
Data-and-Systems/Research/ActuarialStudies/Downloads/ProposedSafeHarborRegulationImpact.pdf on December 2, 2021. 
45 Pollack, A., Harvoni, a Hepatitis C Drug From Gilead, Wins F.D.A. Approval, op cit. 
46 Shye, R., New Hepatitis C Med Epclusa Now Approved, July 28, 2016, GoodRx Health.  Accessed at 
https://www.goodrx.com/blog/new-hepatitis-c-med-epclusa-now-approved/ on April 4, 2021. 
47 Andrews, M., FDA's Approval Of A Cheaper Drug For Hepatitis C Will Likely Expand Treatment, October 4, 2017, NPR.  
Accessed at https://www.npr.org/sections/health-shots/2017/10/04/555156577/fdas-approval-of-a-cheaper-drug-for-
hepatitis-c-will-likely-expand-treatment on March 16, 2022. 
48 Gilead Sciences, Inc., A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV, op cit. 
49 The nonproprietary name of the Epclusa authorized generic is sofosbuvir/velpatasvir and the nonproprietary name of the 
Harvoni authorized generic is ledipasvir/sofosbuvir. 
50 Different hepatitis C drugs are FDA-approved to treat different hepatitis C virus genotypes.  For example, Harvoni and its 
authorized generic are approved to treat only select genotypes whereas Epclusa, its authorized generic, and Mavyret are 
approved to treat all six basic hepatitis C genotypes.   
51 FDA, FDA List of Authorized Generic Drugs, op cit.   
52 Socal, M., et al., Factors Associated With Prescriptions for Branded Medications in the Medicare Part D Program, JAMA 
Network Open Volume 4, Number 3, March 2021.   
53 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op. cit. 
54 Lieberman, S., et al., Sharing Drug Rebates With Medicare Part D Patients: Why And How, op. cit. 
55 82 FR 56336, 56421 (November 28, 2017).  
56 Fein, A., Why Part D Plans Prefer High List Price Drugs That Raise Costs for Seniors, op cit. 
57 For brand-name drugs, rebates in Medicaid are sometimes tied to a drugs best price, i.e., the lowest price paid for a drug 
by any purchaser in the United States, with exceptions.  Notably, Part D prices are not considered in the Medicaid best price 
calculation, which may influence manufacturers to offer higher rebates to Part D sponsors than commercial payers. 
58 Dolan, R., Understanding the Medicaid Prescription Drug Rebate Program, November 12, 2019, Kaiser Family Foundation. 
Accessed at https://www.kff.org/medicaid/issue-brief/understanding-the-medicaid-prescription-drug-rebate-program/ on 
March 1, 2022. 
59 State Medicaid programs regularly publish updated Preferred Drug Lists on their websites.  Examples of States that list 
lower-cost hepatitis C drugs such as Mavyret or the authorized generic version of Epclusa as a preferred direct-acting antiviral 
treatment for hepatitis C as of May 5, 2022, include the following: Florida, West Virginia, Ohio, Georgia, Missouri, and 
Arkansas.  Note that this list is not exhaustive.  
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Endnotes | 33    
 
60 Courses of treatment among hepatitis C drugs range from 8 to 24 weeks.  We used the most common length of 
treatment12 weeksto compare list prices among all the hepatitis C drugs in our study, except Mavyret which has a typical 
treatment length of 8 weeks.  
61 Gilead Sciences, Inc., A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV, op cit. 
62 MedPAC, Report to the Congress: Medicare Payment Policy, Chapter 13: The Medicare prescription drug program (Part D): 
Status report, March 2021.  
63 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op. cit. 
64 Lieberman, S., et al., Sharing Drug Rebates With Medicare Part D Patients: Why And How, op. cit. 
65 Sacks, C., et al., Assessment of Variation in State Regulation of Generic Drug and Interchangeable Biologic Substitutions, 
August 31, 2020, JAMA Internal Medicine Volume 181, Number 1, August 2020.   
66 National Conference of State Legislators, Generic Drug Substitution Laws, May 3, 2019.  Accessed at 
https://www.ncsl.org/portals/1/documents/health/Generic_Drug_Substitution_Laws_32193.pdf on January 21, 2022. 
67 Liu, A., Gileads stealing hep C share with its cut-rate Eplusa and Harvoni generics, September 16, 2019, Fierce Pharma.  
Accessed at https://www.fiercepharma.com/pharma/gilead-s-authorized-hcv-generics-now-own-over-20-market on April 25, 
2022. 
68 AbbVie, Inc., Common Questions about Mavyret.  Accessed at https://www.mavyret.com/frequently-asked-questions on 
April 25, 2022.  AbbVie defines cure as no hepatitis C virus found in the blood 3 months after treatment ends.  Mavyret is 
used to treat adults and children 3 years of age and older with chronic hepatitis C virus genotypes 1, 2, 3, 4, 5, or 6 infection 
without cirrhosis or with compensated cirrhosis; or GT 1 infection in someone who has been previously treated with a 
regimen that contained a hepatitis C NS5A inhibitor or an NS3/4A protease inhibitor, but not both.  
69 Abutaleb, A., et al., Glecaprevir/pibrentasvir expands reach while reducing cost and duration of hepatitis C virus therapy, 
Hepatology International Volume 12, Number 3, May 2018. 
70 For some beneficiaries, it may be medically necessary or more appropriate to receive a higher-cost hepatitis C drug rather 
than a lower-cost alternative, even if the drug is approved to treat the same genotype(s) of hepatitis C.  For example, a 
patient may be allergic to ingredients in lower-cost drugs that are not in higher-cost drugs, or a patient may find a lower-cost 
drugs adverse effects intolerable but not experience those effects with a higher-cost drug.  
71 Grover, A. and Erlich, D.R., New Drug Reviews: Glecaprevir/Pibrentasvir (Mavyret) for the Treatment of Chronic Hepatitis C, 
American Family Physician Volume 98, Number 10, November 2018. 
72 Abutaleb, A., et al., Glecaprevir/pibrentasvir expands reach while reducing cost and duration of hepatitis C virus therapy, 
op cit. 
73 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op. cit. 
74 Lieberman, S., et al., Sharing Drug Rebates With Medicare Part D Patients: Why And How, op. cit. 
75 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op. cit. 
76 Ninety-seven percent of Part D beneficiaries taking higher-cost hepatitis C drugs reached catastrophic coverage in 2020, 
and ninety-five percent of Part D beneficiaries taking lower-cost hepatitis C drugs reached catastrophic coverage. 
77 Social Security Act  1860D-15(b).  The final plan payments (reinsurance) by CMS are, per statute, to be based on the costs 
actually incurred by Part D sponsors and must reflect any applicable DIR.  DIR is apportioned only between Medicare and the 
Part D plan, generally based on the share of the total Part D drug costs that each is responsible for over the course of the 
payment year.  CMS, Medicare Part D  Direct and Indirect Remuneration (DIR), op cit.   
 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Endnotes | 34    
 
78 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 5: Realigning incentives in 
Medicare Part D, op cit. 
79 Martin, K., Essential Facts About Drug Pricing Reform: Medicare Part D Redesign, May 5, 2021, The Commonwealth Fund.  
Accessed at https://www.commonwealthfund.org/publications/explainer/2021/may/medicare-part-d-redesign on March 16, 
2022. 
80 Some beneficiaries may have a medical need for taking higher-cost hepatitis C drugs instead of lower-cost alternatives.   
81 CMS, Part D Payment Modernization Model.  Accessed at https://innovation.cms.gov/innovation-models/part-d-
payment-modernization-model on March 1, 2022. 
Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher  
Medicare and Beneficiary Spending, OEI-BL-21-00200  Endnotes | 35