As the cost of medical care, including pharmaceutical drugs, continues to escalate, many businesses are looking for ways to save money on health care costs. One way businesses can help keep premiums down is by encouraging the use of generic prescriptions.
“In 2005, consumers spent over $229 billion on brand-name drugs,” says Shawn F. Barger, Pharm.D., director of Clinical Pharmacy Management for Gainesville-based AvMed Health Plans. “Billions of dollars of brand-name patents will expire in the next five years, which means that many more generic drugs will become available. These generics are virtually identical to the more expensive brand name, but cost 20 to 80 percent less.”
Smart Business spoke with Barger about the benefits of encouraging health plan members to use generic prescription drugs when they are available to help reduce premiums.
How does encouraging the use of generic prescription drugs help save money on premiums?
When more members of a health plan use generic drugs instead of expensive brand-name drugs, it helps decrease the overall spending for pharmaceutical costs, which translates into decreased premiums for the employer or employees when renewal time comes around. It also saves out-of-pocket money for the employee since co-pays are usually significantly less with generic prescription drugs; sometimes the co-pay is even waived with generic drugs.
How much can an employer or its employees save in premiums using generic prescription drugs instead of brand-name drugs?
It varies, depending on the plan. Research shows that for every 1 percent increase in generic fill rate there is a decrease of 1 percent in overall pharmaceutical costs. According to nationwide study, there is a $20 billion missed savings potential because of underutilization of generics within the commercially insured market.
The savings opportunity from increased use of generic drugs increases every year. In the next five years, more than $50 billion worth of branded drugs will lose patent exclusivity; this year alone, generic alternatives will become available for over a dozen branded drugs.
What are some of the more popular brand-name drugs that have significantly lower generic equivalent costs?
Prozac, for example, was the No. 1 anti-depressant on the market. When its generic equivalent, fluoxetine HCL, hit the market, it provided enormous cost savings. A month’s supply of Prozac costs about $218; the generic costs about $25 today for the same month’s supply. On average, however, a generic drug costs approximately 60 percent less than a brand-name drug. Consumers also pay a lower co-payment for generic medications, saving $15 or more per prescription on average compared to branded medications.
Are generics the same quality as brand names?
There are stil misconceptions about generics that may have to do with some earlier experiences with generic drugs.
Generics have come a long way over the past several years and often are chemically identical to the brand names. In fact, many generics are now being manufactured by the original brand-name pharmaceutical and repackaged as a generic. Today, there are generics available to treat every common condition, including stomach ulcers, inflammation, depression, high blood pressure and high cholesterol.
Doctors are the ones, ultimately, who determine if a generic drug meets the need of a patient. The goal is for doctors to use brand drugs only if there is a clinical value that is not available with other drugs that are generic.
What can an employer do to encourage the use of generics among employees on a company health plan?
When reviewing a health plan for employees, select brand tiers with high co-pays and keep the generic co-pay low. Also, consider choosing benefit options that charge a fee if a member chooses the brand manufacturer of a drug when a generic is available. Employers can also encourage the use of generic prescription drugs by keeping their workers informed about the cost benefits of using generic drugs. This kind of information is often readily available from your health plan to distribute to employees. Many health plans also have helpful Web sites available that allow members to compare brand-name and generic prices right online.
And, remember that pharmacies themselves often encourage generics; in Florida, for example, a pharmacy will fill a brand prescription automatically with a generic unless the doctor writes ‘brand only’ on the prescription.