In an effort to curtail rising health plan costs, employers and insurance companies are pushing for generic drug substitution among employees, rejecting more claims for brand name drugs. And it’s about time, according to Michael Law, an assistant professor in the School of Population and Public Health at the University of British Columbia in Vancouver.
“It’s a really intelligent, cost-saving measure,” he said. “It’s long overdue for our private drug plans to be a little more aggressive in the way that they reimburse drug claims.”
In recent years, high-selling brand name drugs such as cholesterol-lowering Lipitor and Crestor have lost patent protection, so no-name, lower-cost substitutes are coming into the market. Yet many patients and their doctors continue to prefer the brand name options.
“Some individuals, despite the fact there’s generics available, will still fill a prescription for a brand name drug because that’s what they’ve been on or it’s what they’re used to. Or, more importantly, their insurance will still pay for it,” said Law.
Between July 2011 and July 2012, Sun Life saw a significant increase in the number of prescriptions coming in with “no substitution” written on them by doctors, said Dave Jones, vice-president of market development at Sun Life in Toronto.
“And oftentimes what we’re seeing is not even the doctor’s handwriting on it — we’re seeing a sticker applied to them.”
In looking at particular drugs, there was a 138 per cent increase in the number of
prescriptions for Lipitor with “no substitution” on them and a 262 per cent increase for Crestor.
“You look at that and you think, ‘I don’t know what’s driving that but I can tell you it’s a significant increase and our role here is to help plan sponsors manage that cost,’” he said.
In an effort to curtail the rising costs, Standard Life is not necessarily declining claims for brand name drugs but honouring the kind of program plan sponsors want, said Jacques Latour, vice-president of sales in group insurance at Standard Life in Montreal. That might mean covering 100 per cent of the cost of generics and a lower percentage for brand names.
“At this stage, that’s what we’re doing — it’s really about the plan sponsor’s preference,” he said. “We’re definitely seeing more and more discussion around drug management and generic substitution is, of course, one piece of that.”
As more brand name drugs come off patent and generic equivalents are introduced, the key is to ensure the generics are used “when appropriate,” said Brad Fedorchuk, vice-president of group marketing at Great-West Life in Winnipeg.
With enhanced generic substitution, reimbursement is based on the cost of generic equivalent drugs, unless a plan member provides appropriate medical evidence she must use the brand name drug.
“Otherwise, when a brand name drug claim is submitted, the drug plan reimburses the cost of a lower priced alternative drug with the same medicinal ingredients.”
However, there is a provision that allows plan members the flexibility to choose to purchase a brand name drug and pay the cost difference, he said.
Plan members ultimately have the choice of which drug they would like to take, as they can pay extra or produce a doctor’s note indicating a medical reason for it, said Jones.
“The plan member can work with their doctor to provide evidence from the doctor that the individual will need specific medication and we’ll put in the exception for that person.”
But if there is a rise in those sorts of claims, this practice may change, said Law.
“Insurance companies would need to think about whether or not they require some form of clinical justification for that kind of substitution (beyond the doctor’s note).”
It’s possible these situations will be treated similar to those for managing disabilities, when employers require more information from the doctor as to the reason for the exception, said Latour.
“What’s going to be happening more and more is doctors may be challenged on that: ‘Why are you doing this?’ So they have to give a legitimate reason.”
Looking to retain their place in the market, brand name drug companies have been handing out incentives such as discount coupons to patients and doctors. But it’s the employer that ends up paying for the difference, said Law.
“It steers people toward taking the brand because they get it for less than the generic out of pocket but the employer ends up paying a lot more.”
For example, the cost of generics in Ontario is 25 per cent of the brand price and typically an employer covers 80 per cent of the cost of a drug, which works out to 20 per cent for a generic drug. But if an employee uses a coupon, the employer is covering 80 per cent.
“So, potentially, it could quadruple the cost for the employer. Whereas, for the patient, it’s a savings,” said Law. “So Sun Life and Great-West are reacting to the presence of these coupons and saying, ‘We’re not actually going to cover that 80 per cent.’”
There’s no advantage to plan sponsors when it comes to discount coupons and sometimes the price is still more expensive than the generic drug, said Latour.
“The employee is getting that benefit, not the sponsor of the program.”
Brand pharmaceutical co-payment cards are another form of incentive, which offer an instantaneous reimbursement to patients. For plans sponsors that do not have mandatory or enhanced generic substitution, co-pay cards are payers of last resort which means that, as first payer, the insurer ends up paying the full amount for the branded medication, placing additional strain on the plan member’s group benefits plan, said Fedorchuk.
For group plans with generic substitution, co-pay cards can be a win-win, he said.
“Plan sponsors pay only the equivalent cost of the generic version of a medication; plan members receive their branded medication and brand pharmaceutical manufacturers retain some market share.”
The push for generic drugs makes sense in a competitive environment where insurance companies are competing for plan sponsors, said Law.
“Being able to offer this will lower the costs employers will face and it’ll also benefit employees when they go to fill prescriptions because the co-payment that they’ll pay will be lower, unless they have one of these coupons.”
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