Encouraging Use of $4 Generics Helps Plans, Consumers Save Money

Due to the use of generic drugs, consumers and health plans are saving billions of dollars annually. Indeed, the number of generic versions of brand name drugs being prescribed by health care professionals increased from 18.6 percent in 1984 to 63 percent in June 2007, according to The New England Journal of Medicine.¹ Two large retailers – Target and Wal-Mart – along with some regional players, are helping to push those savings even higher by offering programs that provide a one-month’s supply of hundreds of generic drugs for just $4.

Employers that encourage employees to take full advantage of these retailers’ $4 generics programs are likely to save money on their prescription drug expenses as well, according to Jim Gartner, Senior Consultant-Pharmacy, Ingenix Employer Solutions.

In the United States, $275 million is spent on prescription medicines annually,² which Gartner says represents 15 percent to 20 percent of all health care costs. “Generics are already saving consumers a great deal of money,” he said. “By using the $4 generic programs offered by Target and Wal-Mart, consumers, health plans and employers can drive savings even higher.”

Generics on the rise

Consumers began to see the potential savings that resulted from using generics after 1984, when Congress passed regulations governing the approval of generic versions of brand name drugs as part of the Drug Price Competition and Patent Restoration Act of 1984, also known as the Hatch-Waxman Act. Under Hatch-Waxman, the abbreviated new drug application was established to expedite review of generic formulations of previously approved brand name drugs.

As patents on branded drugs expire, new generic drugs flood the market, continuing to help tamp down rising drug costs. According to Ingenix data, there will be an estimated decrease in per member, per month spending on prescription drugs of $5.50 in 2008 as a result of generics use. Further, it is predicted that generic drugs will help limit drug price inflation to single digits for the next several years.³

“2008 promises to launch several significant generic drugs, including several highly utilized medications,” Gartner said. “Of particular interest is Merck’s Fosamax^® (alendronate sodium), which will be the first mainstream drug for the treatment of osteoporosis to be available generically in February. With 54 percent of the market share, the generic entry could impact the entire class.”

Generic versions of other branded products, such as Imitrex^® (sumatriptan) for migraines, Lamictal^® (lamotrigine) for bipolar and seizure disorders and Risperdal^® (risperidone) for schizophrenia also will be launched in 2008.

Retailers’ $4 generics programs expand generic benefits
Generic drugs offer consumers savings of between 30 percent and 80 percent off the branded drug prices and, according to a study by the Congressional Budget Office, those savings total between $8 billion and $10 billion each year.⁴
The additional savings offered by maximizing patient use of the Target and Wal-Mart $4 generics programs for more than 350 medications could add several hundred thousand dollars to an employer’s bottom line, Gartner estimated. Ingenix found that one company with 12,000 employees could save up to $300,000, another company with 20,000 employees could save up to $500,000, and one with 40,000 employees could save well over $1 million if all of their employees switched to the $4 generic programs.

“In addition to encouraging consumerism, inviting your employees to save money for themselves and all parties – including the plan and the company – is a true win-win situation,” Gartner said. “Many consumers have not taken advantage of these programs, so they and their employers are paying more for their medications than they should be.”

For example, if an employee with a $10 co-pay for generic drugs goes to a non-$4 program pharmacy with a generic prescription that retails for $35, he or she will spend $10 and the plan will pay $25 – the difference between the cost of the medication and the co-pay. If the individual fills that same prescription at Target or Wal-Mart, the patient will pay $4 and the plan will pay nothing, he explained.

Strategies to promote $4 generic programs

Recognizing that making employees aware of the $4 generic programs is an opportunity for employers to save money, Ingenix recently launched an initiative to help drive increased adoption of the $4 generics among employees, according to Gartner.

“Using the Ingenix database and analytic tools, we can look at information about employees to see how many employees are affected, what products they take that are available as generics, whether they are using generics that are available on the $4 generic lists and, if so, where they go to fill those generic prescriptions,” he said. “Then we can measure what the employer would save if those employees were utilizing a $4 generics plan.”

Although a company’s pharmacy benefits manager (PBM) might have the data companies need to determine where to target efforts, “PBMs aren’t that inclined to provide that information because they have network contracts with a variety of pharmacies and would not want to jeopardize their discount by promoting one pharmacy over another,” Gartner said. “We have a comprehensive database available to us and can put the whole program together for employers, from gathering data, performing analysis and fulfilling the communications outreach. It’s a great package deal,” he remarked.

To help employers direct employees to the $4 generic drug program retailers, Ingenix can create multimedia templates – including direct mail, e-mail and newsletter communications – that the employer can use to alert company employees about the cost savings.

“Within the communications, we explain that the employee saves and the employer saves – which are both positive outcomes – and we describe how to transition that prescription to the Target and Wal-Mart pharmacies,” Gartner said.

Another benefit of $4 generics is that in driving affordability, they also encourage compliance with drug regimens. “If the medication is not affordable, people on limited incomes may try to stretch out dosing or not even fill the prescription at all, which compromises the health of those employees,” he added.

Both to encourage use of the $4 programs and increase drug regimen compliance, Ingenix might suggest that a company create incentives for employees to use the programs, such as requiring a higher co-pay for using alternate pharmacies to fill generic prescriptions.

“Our goal is to promote consumerism, drive affordability with generics and save employers money,” Gartner said. “For every employee who takes advantage of the $4 generic drug programs at Target or Wal-Mart, we are one step closer to meeting that goal.”

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