Generic solutions Featured

8:00pm EDT April 25, 2008

One of the biggest drivers of health care costs is prescription drug spending. It is on the rise and is expected to continue in the coming years. An important key to containing rising health care costs is intelligent pharmacy benefit design.

Finding a way to manage prescription drug costs can help employers start to get a handle on health care costs. In fact, the best way to combat rising health care costs is through smart pharmacy benefit design, says Chronis Manolis, vice president of pharmacy services for UPMC Health Plan.

“Consumer acceptance of generic drugs has grown substantially and is continuing to grow,” Manolis says. “Generic drugs are cost-effective alternatives that offer the same level of safety and quality as their brand-name equivalents, often at a lower co-payment, and many consumers now understand that.”

Smart Business spoke with Manolis about ways to design pharmacy benefit packages that can help control health care costs.

Why should employers promote the use of generic drugs by their employees?

The evidence from the numbers is overwhelming. The average retail price of a brand-name drug is now approximately $111 compared to the average retail generic price at $32. That savings will really add up for employees, in particular those who are managing multiple medication regimens. Consumers can save even more by taking advantage of the growing number of drug programs that offer generics for $4.

Why is this an opportune time to promote the use of generic drugs?

Many consumers now understand that extensive media advertising not only raises the awareness of certain brand-name drugs, it also accounts for part of the reason those drugs are so expensive. Generic drugs have the same chemical makeup but have no expensive advertising campaigns behind them. Therefore, they can be offered at much lower prices. In turn, insurance companies can offer these drugs to members for a much lower co-payment. Consumer acceptance of generic drugs has grown substantially in recent years, and the current generic market landscape is extremely favorable. Over the next five years, 63 of the most popular drugs will be available in a generic version, as the patents on some of the most popular medications are due to expire. These include Imitrex, Fosamax and Risperdal in 2008, Prevacid and Topamax in 2009, Cozaar and Lipitor in 2010 and Actos and Zyprexa in 2011. In 2007, Ambien went generic. A 30-day supply of the generic version now costs $15, compared with $125 for Ambien.

How can generics help lower costs?

Employers need to work with their health insurer to develop a pharmacy benefit design that promotes the use of generic drugs by offering lower co-payments on generics. As an incentive to get your employees to start using generics, you may consider a waiver of co-payments as part of a trial run. Utilizing mandatory generic benefit designs will ensure rapid generic uptake amid the many new generic drugs that will be available throughout the next several years. To increase awareness and acceptance of generics, you could implement promotional and educational campaigns with your benefits administrator to educate employees. These programs can include educational materials, work-site promotional materials and pharmacist information sessions to build employee awareness and confidence in generics.

Are there other ways to use your pharmacy benefits to save on costs?

Keep your employees current on all aspects of their pharmacy benefits, including:

  • Making sure your plan includes utilization management techniques, such as step therapy, which is the practice of beginning drug therapy for a medical condition with the most cost-effective and safest drug therapy and progressing to other more costly or risky therapies only if necessary

  • Prior authorization and quantity limits, which also encourage the use of generics and reduce costs through safe, appropriate use of pharmaceuticals

  • Encouraging the use of a formulary guide, which is a list of Food and Drug Administration (FDA) approved medications that are covered by your insurance, as well as online tools that can educate employees about their pharmacy benefits and the availability of generic alternatives

What are some other cost-control methods?

You should consider using mail-order pharmacy fulfillment when appropriate. When a mail-order plan is used, prescriptions for maintenance drugs — such as those used for high blood pressure, asthma, diabetes and arthritis — can be sent directly to an employee’s home. In many cases, employees can receive a three-month supply of their prescriptions for a two-month co-payment. Be sure specialty medication management is included in your plan. Specialty medications are high-cost medications — usually injectables or biologics — used to treat complex clinical conditions. These medications often require close management by a physician or a specialty pharmacy because of their potential side effects and frequent dosage adjustments. Typical strategies include specialty pharmacy distribution and the application of utilization management tools.

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