HMOs pushing generics with sundry incentives

April 2, 2004

Health plans are pushing hard to get their members to use generics, using both carrots and sticks to effect change.

Health plans are pushing hard to get their members to use generics, using both carrots and sticks to effect change. Coupon programs, vouchers, educational initiatives, and multitier formularies that reimburse at a significantly lower rate are being employed by health plans and are demonstrating effectiveness in increasing the use of generic alternatives. This is good for the bottom line, because insurers can save 30% to more than 90% on generics compared with brand names, depending on the drug, according to experts.

A study by IMS Health Inc. in Fairfield, Conn., for example, found that the average price of a brand prescription is $76.29, compared with $22.79 for generics. "HMOs and other insurers are working hard to come up with innovative ways to promote the value of generics," said Kathleen Jaeger, president and CEO of the Generic Pharmaceutical Association in Washington, D.C.

GPhA plans to roll out an educational program this summer aimed at helping plans educate members about generics and enhancing efforts already under way. "The Food & Drug Administration puts all generic drugs through a rigorous approval process," said Gary Buehler, R.Ph., director of the Office of Generic Drugs at the FDA's Center for Drug Evaluation and Research.

Health plans are aggressively sending that message to their members through coupon and voucher programs, among other initiatives, and they are willing to work together to encourage generic utilization. Four health plans in California, for example, joined last fall to give coupons—worth up to $10 each—to 15,000 physicians to attach to patient prescriptions. The members can use the coupons toward their first purchase of generic drugs.

As a result, plan officials say use of generics to treat arthritis, depression, and other chronic problems by their combined 14 million members is resulting in significant cost savings. "For every 1% increase in generic fill rate, we will save more than $7 million," said Sam Ho, M.D., chief medical officer for PacifiCare Health Systems Inc., in Cypress, Calif., one of the four health plans involved in the effort. "We can use that money to make sure we continue to provide an affordable pharmacy benefit."

Regional coupon and voucher programs are being implemented by some national plans, including Aetna, Health Net, Cigna, and Anthem. Traditional insurers, especially Blue Cross Blue Shield plans, are also implementing educational programs and voucher campaigns.

Consumer-directed plans, which create personal medical funds with employer and member contributions to cover health costs, are stressing the efficacy of generics. Destiny Health is such a plan. It encourages use of generics for chronic disease treatment by depleting members' personal medical funds when they use branded drugs. All generics for chronic diseases are in the plan's first tier, with a lower co-pay and no draw from the personal accounts. "Most people want to do the right thing to save on healthcare costs," said Stuart Slutzky, senior director for product development. "This program has been extremely successful."

Slutzky appears to be right about how people view generics. A September 2003 survey by the Wall Street Journal Online and Harris Interactive Health-Care (see sidebar) showed that three times as many Americans responded that generic prescription drugs were a "very good/fairly good value" for the money compared with the more expensive brand-name prescription drugs (63% to 21%, respectively).

 

How the public views generic and branded drugs

Very good/fairly good valueVery good valueFairly good valueAverage valueSomewhat poor valueVery poor valueNot sure
Generic prescription drugs63%24%39%25%6%3%3%
Brand-name prescription drugs215163123214

 

"It's hard to say exactly how many health plans are starting to push hard on generics, but you read every day about some initiative," said Carolyn Stables, spokeswoman for the Academy of Managed Care Pharmacy in Alexandria, Va. "Things are changing fast."