Why, you may ask, would a Pharmacy Benefit Manager (PBM) want to conduct a clinical trial?
Big hint: Effient was approved in July 2009. Plavix will be subject to generic competition in 2011.
Now, can you guess which of the two products will be simultaneously less expensive for payers and more profitable for Medco?
SAVING MONEY, MAKING MONEY
Dr. Robert Epstein, Medco's chief medical officer, pulls no punches in yesterday’s press release:
“Plavix is going generic in 2011 and if found to be equally effective as Effient for patients who have a normally functioning version of the CYP2C19 gene, the study provides the evidence that would allow these patients to opt for a lower cost treatment.”Translation: "Medco wants to profit by helping its customers—payers of prescription drug plans—save money. So sorry about your R&D investments, Eli Lilly."
It’s no secret that generic substitution is the most reliable and consistent way for a payer to reduce expenditures in a prescription drug plan.
The average brand-name prescription was $137.90 in 2008, while the average generic prescription was $35.22. (source) At these average prices, a brand-to-generic substitution would save $102.68 per prescription, a cost reduction of 75%.
Generic prescriptions are also more profitable for the channel—pharmacies, wholesalers, and PBMs—than brand-name drug prescriptions. (See my new report for details.) The superior profitability of generic drugs for the channel creates powerful incentives for accelerated generic substitution and also aligns the PBM’s interests with payers.
Medco’s announcement highlights how the economic and business interests of companies within the pharmacy supply chain are diverging away from brand-drug pharmaceutical manufacturers. It's also a pretty compelling counter-example to the idea that PBMs have an incentive to dispense more expensive brand name drugs over cost-saving generics.
The chart below should provide a pre-Halloween scare for pharmaceutical manufacturers. It appears on page 22 of the 2009 Medco Drug Trend Report. Click the chart to enlarge it.
In the first 30 days after generic versions of Merck’s Fosamax® (alendronate sodium) were launched in early 2008, the brand-name product lost 94% of its market share at mail and 84% of its market share at retail.
Ouch. That’s gotta hurt.
You youngsters may not believe it, but I’m old enough to remember when “end-of-lifecycle planning” was a legitimate consulting project for brand drugs with generic competition. A 1998 CBO study backs up my recollection of yesteryear. The average market share of 21 generic drugs launched from 1991 to 1993 was only 44% after one year (per the CBO in 1998).
Ah, yes, the good old days…for pharmaceutical manufacturers.
It's all fun and games until someone starts a fire.
My hometown Phillies are on the verge of another trip to the World Series tonight. As a Philadelphia resident, I was happy to see this story: Cops brace for possible repeat of unlawful Phillies phever.