Printer Friendly

Generic remedy: Pharmacists and physicians can become partners in lowering drug costs for insurers. (Health-Care Costs: Life/Health).

Prescription drugs are a major contributor to the double-digit increases in health-care costs, and insurers have saved money by encouraging consumers to choose generic drugs over brand-name drugs when it's appropriate. Now, some health insurers are giving pharmacists incentives to help increase the number of prescriptions filled with generic drugs.

Drug spending is expected to reach $155 billion in 2002 and climb to more than $245 billion in 2006, according to AdvancePCS, the nation's largest pharmacy-benefit manager. And on average, brand-name drugs cost four times more than generic drugs. The average price for a brand-name drug was $72.70 in 2001, while the average price for a generic drug was $16.85, according to a drug trends study by AdvancePCS.

Brand-name drugs that have a patent don't have an equivalent generic drug to compete with, so they're usually quite expensive. But once the drug company loses the patent, the price of the brand-name drug usually drops in price, said John Fitzgibbon, partner in charge of the managed-care practice at KPMG LLP, an accounting and tax firm.

Still, it pays to switch to generic drugs when a brand-name drug goes off patent. It's not unusual for the price of prescriptions to drop 70% when shifting from brand-name to generic drugs, Fitzgibbon said.

In an effort to control those costs, Blue Cross & Blue Shield of Illinois is looking at the prospect of paying pharmacists to check with physicians to see whether it would be appropriate to change prescriptions for brand-name drugs to generic drugs, said Robert Kieckhefer, a spokesman for the Illinois Blues. If the company decides to implement the plan, it would pay pharmacists $1 for every changed prescription, beginning in January.

Giving pharmacists these types of incentives is something WellPoint Health Networks Inc. has done since the early 1990s, said Robert Siedman, chief pharmacy officer for WellPoint. The company sets thresholds for generic substitutions, and the dispensing fee increases when the pharmacy meets the minimum threshold.

"We try not to tell people 'no'," and that's part of the reason the program has been successful, Siedman said. As a result, almost 50% of WellPoint's members' prescriptions are filled with generic drugs.

WellPoint also is waiting for the Food and Drug Administration to rule on whether or not it will allow the allergy medication Claritin to go over the counter. Once the change is made, WellPoint has said it would require prior authorization before agreeing to pay for other prescription allergy drugs.

Trigon Healthcare Inc., which also gives pharmacists a financial incentive to increase the number of prescriptions filled with generics, has found that the higher the percentage of generic prescriptions filled goes, the bigger the cost savings.

For each increase of one percentage point, employers save $4 million to $5 million a year, and individual consumers save $2.5 million a year, said Beth Laws, a Trigon spokeswoman. Trigon has increased the number of members' prescriptions filled with generic drugs to 45%, up from 37% five years ago.

Physicians, Too

WellPoint also gives physicians an incentive to write generic prescriptions. The company pays health maintenance organization physicians when they meet specific financial indicators, and the insurer pays preferred provider organization physicians when they maximize the use of generic drugs over brand-name drugs, Siedman said.

In addition, insurers have been using more traditional ways to cut costs for brand-name drugs through formularies and tiered copayment structures, Fitzgibbon said. A copayment for a generic drug might be $5, while a copayment for a brand-name drug on the formulary might be $15, and a copayment for a brand-name drug not on the formulary might be $25.

The strategies are a must when drug companies now are spending billions of dollars to market the medications to consumers. "Studies say that if people see an ad and then go to their doctor and ask for it, they usually get the prescription," Fitzgibbon said. "It's hard to counter that."

Pharmaceutical companies spent $859 million on direct-to-consumer ads in 1997, but that number rose to $2.5 billion in 2001, Laws said. Press reports have said the marketing of Vioxx, an anti-inflammatory drug, costs more than the marketing for Nike or Campbell's soup.

Pharmaceutical companies also give physicians free samples of brandname drugs, which the doctors usually pass along to patients. Trigon is countering that by providing physicians with samples of generic drugs with which to stock their closets.

Along with the generic samples, Trigon passes along educational materials to physicians and patients about the differences in costs between brand-name drugs and generic drugs. "Physicians say they find this useful because it helped them highlight the dramatic differences in costs" when they recommended alternative medications to patients, Laws said. For consumers, Trigon is putting an interactive feature on its Web site in which consumers can search by drug name or disease category to find cost-saving alternatives to brand-name drugs.


Brand name drugs that have lost their patent recently:

* Prozac, for depression

* Prinivil or Zestril, for hypertension

Scheduled to lose their patents:

* Claritin, for allergies

* Priolosec, for gastroesophageal reflux disease

* 2000: 40.1%

Generic drugs as a percentage of all prescriptions dispensed:

* 2002: 41.2%

Generic drugs as a percentage of total prescription expenditures:

* 2000: 11.6%

* 2001: 13%

Eight therapeutic classes accounted for almost 60% total drug expenditures in 2001:

* Cardiovascular drugs, which were the single largest contributor

* Psychotherapeutics

* Hypoglycemics

* Antihistamines

* Gastrointestinal drugs

* Antiasthmatics

* Analgesics

* Antiarthritics

Sources: Kevin DeStefino, National Pharmacy Practice leader at Watson Wyatt; and AdvancePCS
COPYRIGHT 2002 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2002, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Insurers push generic drugs over brand-name drugs
Comment:Generic remedy: Pharmacists and physicians can become partners in lowering drug costs for insurers. (Health-Care Costs: Life/Health).(Insurers push generic drugs over brand-name drugs )
Author:Suszynski, Marie
Publication:Best's Review
Geographic Code:1USA
Date:Dec 1, 2002
Previous Article:Going formal: Brazil's widespread "informal economy" left many citizens outside the tax system but ill-prepared for retirement--until a new product...
Next Article:Managing life risk options: Unable to offer umbrella catastrophe coverage to corporate customers, direct writers may instead partner with reinsurers...

Related Articles
Drug utilization: what is to be done?
Strong medicine for drug costs.
A Bitter Pill.
Multiple-choice question: disease management, cost shifting and prescription-drug initiatives are some of the strategies insurers are using to...
Rx for costs: health insurers are finding generic, over-the-counter and mail-order drugs are the right prescription to help reduce the nation's...

Terms of use | Privacy policy | Copyright © 2022 Farlex, Inc. | Feedback | For webmasters |