Monday, February 04, 2013

Looking Beyond Generics to Reduce Drug Costs (Guest Post)

Today’s guest post is from Kay Morgan, Senior Vice President of Drug Products and Industry Standards Research and Compliance at Elsevier’s Gold Standard.

In this guest post, Kay argues that payers should not simply deny access to brand-name drugs, even when generic equivalents are not available. Instead, she suggests that payers should use such technology tools as MEDalternatives to quickly and efficiently identify cost-effective therapeutic alternatives.

Please contact Marialuisa Curran, Product Marketing Manager, Commercial & Retail Pharmacy at Elsevier’s Gold Standard ( or 813-579-2794) with any questions about the article.

Looking Beyond Generics to Reduce Drug Costs
By Kay Morgan, Senior Vice President of Drug Products and Industry Standards Research and Compliance, Elsevier/Gold Standard

Prescription drug spending in the U.S. increased to $307 billion dollars in 2010.1 Although drug costs account for roughly 10 percent of U.S. healthcare spending, ranking behind hospital stays and professional services, it is shockingly high when compared to drug spending in other developed nations. The U.S. accounts for only 4.5 percent of the world’s population, but fully 42 percent of annual worldwide prescription drug expenditures. By 2019, HHS predicts that U.S. drug spend will increase to $457.8 billion. Approximately 50 percent of the total bill is paid for by private health insurance plans.2

The fact that we pay more for our drugs in the U.S. comes as a surprise to no one and the reasons for that are many. But why do our costs continue to rise when there are more generics available at lower prices than ever before? During the past year, generic drugs, whose average price was already about 75 percent lower than the average price for brand name drugs, actually decreased in cost, deflating by almost 22 percent. During the same time period, the price of highly used brand drugs grew by 13 percent, more than six times the rate of inflation.3

Brand name drugs account for only 22 percent of prescriptions written but 78 percent of our drug spend. Why? Because as generic drug prices go down, the price of brand drugs, for which there are no generic alternatives, goes up even more sharply. Most health plans and pharmacy benefit managers (PBMs) have done a great job switching members from brands to generics and have maximized what savings can be achieved through that route. They will not achieve any more savings on drug costs unless and until they focus on the 22 percent of prescriptions that make up the bulk of the costs.

One way to contain those costs is to deny high-priced brand prescriptions when submitted by pharmacies for plan members. In 2009, more than 14 percent of new commercial prescriptions went unfulfilled due to denials. And more than 10 percent of all prescriptions written for new brand-name drugs were denied. Unfortunately, denials lead to abandoned prescriptions (up 68 percent) and poor adherence, which very likely increases overall health care costs in the end.

So, how do payers, who really do want their members to have necessary medications, rein in drug costs while ensuring quality care for patients? The answer is not in denying large numbers of brand name prescriptions, but in finding alternatives for them. While patent-protected brands have no generic counter parts, that does not mean they have no therapeutic alternatives. Often, a different brand drug, or a combination of other brand drugs, with the same efficacy can be purchased for greatly reduced prices – as great as 75 percent savings in some cases. And, thanks to recent advances in drug database technology, these alternatives can be easily found and suggested to prescribers, pharmacists, and patients.

Click here to learn more about MEDalternatives, Elsevier's comprehensive resource for drug therapy options and costs.

1. IMS Institute for Healthcare Informatics, “The Use of Medicines in the United States: Review of 2010."
2. Kaiser Family Foundation, Prescription Drug Trends, May 2010.
3. Express Scripts, Health Care Insights, “Price Gap Widens Between Brand and Generics,” 11/28/12

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