The driving factor in price reduction for generic drugs in years' past has been competition. The market economics allowed for a large amount of manufacturers (typically 4 or more) to enter the market for a particular drug that was no longer under patent protection. This competition amongst manufacturers drove the price of the drug down, as each manufacturer attempted to gobble up market share and lock-in profits. These market forces that traditionally drove generic prices down are reaching a tipping point.
Manufacturers of generic products are being squeezed by reduced profits and some are opting out of the market. This leaves the remainder of generic manufacturers vulnerable to supply-line fragility where recalls, manufacturing glitches, material shortages, and delivery changes impact price adversely. In addition, pharmaceutical manufacturers of Branded products are entering into "pay for delay" tactics with the generic manufacturer with first entry rights with the 180 day exclusivity.
These issues, coupled with the fact that there are less block-buster brands losing patent protection, have generic manufacturers shifting their intellectual focus to creating high profit biologicals or bio-similars for the specialty marketplace. Recently, we are seeing that the remaining generic manufacturers are finding it economical to raise prices of their generic supplies as the competition erodes.
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Given the current trend, what can Benefit Managers and Plans do to manage their pharmacy benefit?
Savings in the generic arena still exist. There are still opportunities for plan administers to save on costs in the broad spectrum of plan design and product choice utilization.
Each major therapeutic class has a viable generic product that can be the keystone for cost saving therapeutic choices. Maximizing generic choices are peaking at or near 86% generic utilization. Plan administrators need to explore viable OTC (Over The Counter) products to be included into their plan design. Communications can be utilized to educate members and influence major therapeutic class drug conversions with co-pay inducements.
Each major therapeutic class has a viable generic product that can be the keystone for cost saving therapeutic choices. Maximizing generic choices are peaking at or near 86% generic utilization. Plan administrators need to explore viable OTC (Over The Counter) products to be included into their plan design. Communications can be utilized to educate members and influence major therapeutic class drug conversions with co-pay inducements.
Exclusions of therapeutically equivalent brand name entries to the market place that are equivalent to older generic products can save significantly over accepting manufacturer's PBM promoted formularies. Some steps that Plan administrators can take to ensure that they are capturing the potential savings opportunities are, but not limited to:
- Review plan data with a trusted advisor or service provider to identify areas where there are room for improvement
- Identify areas and therapeutic classes where there are OTCs available or generics that aren't being utilized
- Review co-pay and plan design to ensure that members are able to make the appropriate decision both financially and therapeutically between OTCs, generics, and Brand drugs
- Review contract language to ensure that “classifications” (i.e. generic, single source, multi-source, brand, specialty) and contractual guarantees are clearly defined
- Member communications designed to promote newly introduced generic and OTC drugs
