Generic drugs Featured

7:00pm EDT November 24, 2006

If two different brands of medications made of similar formulas treat an illness with equal effectiveness, but one costs less, which would you choose? The answer seems obvious, yet many people and companies pay extra for brand-name drugs.

“There is a lack in confidence that generic versions will have equal effectiveness,” says Chronis Manolis, vice president of pharmacy services with UPMC Health Plan. FDA-approved generic drugs are just as effective as brand-name drugs and benefit both an employer and an employee by reducing cost without compromising care.

Smart Business spoke with Manolis about how the combination of well-designed benefit plans and increased generic drug utilization can benefit employers and employees.

How can an employer maximize the financial performance of a pharmacy benefit plan?

Instead of simply shifting costs to employees, an employer should look for a partner with innovative ideas to promote appropriate and cost-effective utilization. A comprehensive pharmacy benefit that balances care quality and cost can create confidence in an employer and increase morale among employees from a benefit perspective.

Maximization starts with choosing a pharmacy benefits manager who has comprehensive strategies and capabilities that address utilization and net cost. Those two pillars of benefit design will define financial performance.

Net cost strategies include maximizing network and channel discounts as well as tactics to address drug mix. Utilization management programs should be evaluated to ensure alignment with the goals of the employer.

What are sensible ways a company can reduce drug cost?

There are two main strategies to control drug costs. The first is utilization management, which ensures the appropriate and safe use of a drug. This management strategy includes intelligent formulary design, prior authorization programs, quantity management and step therapy. For example, step therapy may require a patient to try a generic form of a drug before having access to an expensive brand-name drug.

The second strategy involves lowest net cost. Strategies should include proper drug mix such as brand versus generic or preferred brands versus non-preferred brands. Generics provide a tremendous opportunity to reduce drug costs while providing the same care and treatment as name-brand drugs.

How can increased awareness of generics reduce costs?

There is still a general lack of confidence in generic drugs in regard to safety and effectiveness. Generic drugs save patients money as they begin to foot the bill for health care costs that their employers can no longer cover. They also treat illnesses with great effectiveness. For the first time, almost all of the major therapeutic categories such as lipid-lowering agents, proton pump inhibitors (PPIs) and anti-depressants have highly effective generic products as alternatives.

The ultimate goal is to get plan members talking to their physicians about therapeutic alternatives. This inquiry into generic drugs will provide a shift from brand-name to generic drug utilization and help reduce benefit costs. For every 2 percent increase in the generic dispensing rate, employers can save 1 percent in drug costs.

Some companies are choosing to raise the co-pays on brand-name drugs while keeping the co-pay for generics the same or lower, as a way to encourage members to use these alternatives. Another strategy is brand-only deductibles that require members to meet a deductible if they choose a brand-name drug, but provide an exemption if they use a generic form. Additionally, a benefit plan partner should provide educational materials to help convey the message of generic effectiveness and reduced cost.

What features should employers look for when selecting a pharmacy plan and provider?

A pharmacy benefit partner should provide a transparent offering that clearly reveals defined costs and coverage. Aggressive network discounts should be included in a plan as well as an all-inclusive administrative fee.

The all-inclusive administrative fee is crucial because a company will get the most value out of the plan without many of the extra, hidden charges. Hidden charges that are sometimes added to an administrative fee may include customized reporting, clinical program development, and Drug Utilization Review fees. Furthermore, comprehensive clinical, formulary and benefit trend offerings should be aligned with the company’s goals and needs.

Lastly, data integration capabilities by the partner between pharmacy and medical claims can provide a company with powerful information to improve clinical and financial outcomes. In summary, a partner that combines robust clinical and unit cost capabilities is critical so an employer can be confident that their plan is being managed properly.

CHRONIS MANOLIS is the vice-president of pharmacy services at UPMC Health Plan. Reach him at or (412) 454-7642.