News 07/06/2544

News 07/06/2544

TREND OF THE MONTH: EMPLOYERS OFFER DIFFERENT INCENTIVES TO ENCOURAGE GENERIC USE
Because of the cost savings when generic drugs are prescribed, many health plans encourage the use of generics by offering financial incentives.

TREND OF THE MONTH: EMPLOYERS OFFER DIFFERENT INCENTIVES TO ENCOURAGE GENERIC USE

[Drug Benefit Trends 13(4): 11-12, 2001. © 2001 Cliggott Publishing Co., Division of SCP/Cliggott Communications, Inc.]

Because of the cost savings when generic drugs are prescribed, many health plans encourage the use of generics by offering financial incentives. According to the Wyeth-Ayerst Prescription Drug Benefit Cost and Plan Design Survey Report based on data collected in the fall of 1999 from 446 employers representing more than 15 million beneficiaries, the most common difference between brand-name and generic copayments is $5, although some differ by as much as $20. Approximately 73% of the employers surveyed have a lower copayment for generic drugs than for brand-name drugs.

Thirty-nine percent of employers surveyed always require the generic drug to be dispensed; the patient must pay a penalty to receive the brand-name drug. Thirty-one percent allow the physician to require that a brand-name drug be dispensed, and the patient pays a penalty only if he or she insists on a brand-name drug when the physician doesn't require one. The remaining 30% of employers do not require the patient to receive a generic if one is available, so the patient can request a brand-name without incurring a penalty.

As shown in the cover figure, employers are becoming less lenient in allowing their beneficiaries to receive a brand-name drug when a generic version is available and appropriate. Many in the industry expect this trend to continue.

Drugs Excluded and Included

Results of the survey show that employers are most likely to exclude hair restoration drugs, antiwrinkle medications, and appetite suppression drugs from coverage (see Figure). However, there appears to be a minor trend for the increased coverage of drugs that treat obesity or encourage weight loss; while 86% of employers excluded this category in 1997, only 78% excluded it in 1999.

Fig

Figure. An employer's decision to exclude a drug or drug category is based on numerous factors, including the cost of the drug to the employer, the availability of a similar therapy in a nonprescription form, the attitude of the employer toward health care benefits, and the competition for hiring and retaining employees.

Coverage of oral contraceptives continues to increase. This increase may be partly due to the coverage of Viagra, with some patients arguing that both Viagra and oral contraceptives are elective "life-enhancing" drugs and should be treated similarly by prescription drug plans. This argument may have had an effect because the coverage trend for Viagra parallels the trend for oral contraceptives.

Other Highlights

Employers use PBMs to administer their prescription drug benefit programs as well as to manage the cost and use of these programs. Approximately 75% of the respondents allow their PBMs to perform utilization management programs, such as concurrent drug utilization review (DUR) and retrospective DUR.
Approximately 18% of employers reported using a 3-tiered copayment structure. Copayment programs remain the most popular cost-sharing methodology, with only 16% of the respondents requiring beneficiaries to pay a percentage of the cost.
Programs targeting diabetes and asthma are the most frequently identified disease management programs. These are diseases for which early intervention and effective management can improve patient health and reduce overall medical costs.
Approximately 87% of survey respondents include a mail order pharmacy benefit in their program. Maximum allowable cost (MAC) pricing was originally established to provide pharmacies an incentive to buy lower cost generic drugs. Most PBMs no longer offer MAC pricing for generic drugs purchased through mail order and this causes the cost for many generic drugs to be higher in mail order than they are from retail pharmacies where MAC pricing still applies.
The average reimbursement rate, based on average wholesale price (AWP) and dispensing fee, for retail pharmacies has not changed over the last year. The average AWP discount is 13.1%, and the average dispensing fee is $2.30.