By increasing the use of generic drugs, small-business owners find relief from the rising costs of health care
by Edmond S. Weisbart, M.D.
The June/July 2006 MyBusiness Manual focused on small-business insurance. It's no secret that health insurance is one of the top concerns of business owners. This Web Extra article offers one solution to lower costs: generic drugs.
While the cost of health care in the United States has been rapidly increasing, there is relief available. Small-business owners can achieve significant savings for their businesses and their employees by offering pharmacy-benefit designs that encourage the use of generic alternatives to the more costly brand drugs.
Why does increasing generic utilization save employers and employees money? Because, on average, a generic drug costs $60 less than a brand name drug. Generic medications contain the same active ingredients as their branded counterparts while offering the same clinical value.
Pharmacy-benefit manager Express Scripts conducted a study showing that at least $20 billion could have been saved nationally in 2004 by utilizing generic drugs in clinically appropriate settings. This number actually underestimates the opportunity; the study only examined six major drug classes.
This historic savings can be achieved without shifting costs to employees by simply substituting generic alternatives for more costly brand drugs. For every 1 percent increase in the generic fill rate there is a corresponding 1 percent decease in pharmacy spending, which means significant resources can be freed up to use for other pressing needs.
The savings opportunity from generic drugs has never been greater. In 2006, generic alternatives will become available for at least 15 commonly used prescription drugs, representing $11 billion in sales nationally.
By the time a brand-named drug loses patent protection and is approved as a generic medication, it has already been on the market for many years and often been used by millions of people. As a result, there is a large amount of data about the drug available and the side effects and potential complications are generally already realized and well understood. While new brand medications clearly have an important role in health care, benefit designs that encourage the use of generic medications may also be providing a safety advantage to patients. The use of new brand medications should be targeted at those situations where there is clear evidence that their proven advantages outweigh their unknown risks.
Small-business owners can reduce pharmacy benefit costs by following these five recommendations:
1. Educate employees on generic alternatives using effective communication tools. When more employees feel empowered to ask their physicians if there is a less expensive generic alternative and ask their pharmacists--with their doctor’s approval--to dispense the generic version of a drug, we can all start to reap the benefits of the generic opportunities, without impacting quality of care.
2. Implement an active formulary approach, which is a plan that includes many but not all drugs. In developing a formulary, the primary considerations are safety, efficacy and clinical appropriateness. When coupled with effective benefit tools, the formulary helps guide the ways that physicians prescribe and the ways that members use their benefits. Over time, formulary decisions have a tremendous impact on a plan's long-term cost.
3. Adopt a three-tier benefit design. The three-tier design has three different copay levels depending on the medication dispensed. The levels typically are: generic, preferred brand and non-preferred brand. Research points to copay differentials as a key driver for increasing generic fill rates.
4. Implement step-therapy programs yearly. Step therapy promotes the appropriate use of generic medications and some less-expensive brand drugs before stepping up to more-costly brand drugs. These programs are carefully designed with medical exception recommendations to ensure that they never compromise health outcomes. Employers can save 10 percent or more on overall drug spend when implementing all of the step-therapy programs.
5. Encourage employees to use home delivery. With a high level of automation, home delivery is the safest and most effective way to get medications to your patients. The 24/7 service is convenient, confidential, and customer-friendly.
At a time when it's increasingly difficult to preserve employee benefits, it's good to know that there are several proven tools to improve the affordability of the pharmacy benefit without compromising health outcomes.
A copy of the Express Scripts study is available from their Web site (256 KB, PDF).
Dr. Weisbart is chief medical officer of Express Scripts, Inc., a pharmacy-benefit manager in Maryland Heights, Mo.
Posted by Megan Goodchild on May 6, 2006 01:01 PM
