Spending on prescription drugs has become the fastest growing component of health care expenditures today, rising more quickly than the cost of hospital or physician services. In fact, spending for prescription drugs has more than quadrupled since 1990.
There is a simple solution for health insurance advisors who want to help employers reduce drug costs: generics.
Generics can cost as much as 80% less than their brand counterparts, according to the Generic Pharmaceutical Association. In 2005, the average retail price of a generic prescription drug was about $30, compared with $100 for the brand name drug.
Certainly, employers and their benefits advisors have made great strides in efforts to promote generic use, but the Congressional Budget Office estimates generics can save consumers up to $10 billion more per year at retail pharmacies with no sacrifice in quality or effectiveness.
Here are 3 ways your client employers can cut drug costs and encourage the use of generics and therapeutic alternatives by employees who currently rely on brand medication.
1. Make sure the employer’s pharmacy benefits program includes a well-managed formulary.
In 2006, close to 100 new generics became available, including drugs to treat common conditions such as high cholesterol and heartburn or acid reflux. Among the most popular generics to hit the market last year was simvastatin, the generic equivalent of Zocor, a drug used to lower cholesterol.
Moving brand drugs to a client’s most expensive coverage formulary tier when new generics are introduced will encourage employees to try the generic in place of the brand. Generally, employees will consider switching to a generic when the co-payment for that drug is $20 to $40 less than what they pay for the brand. Getting the client’s health insurer or pharmacy benefits manager to send quarterly updates to employees about formulary changes is one easy way to encourage employees to take advantage of newly introduced generics.
Employers can also require that employees use a generic in place of a brand for a fixed amount of time, say 6 months, or require that brands with generic equivalents be pre-authorized by the health plan prior to payment.