PRESCRIPTION DRUGS Study: Generics can save billions

The study said generics for stomach ailments could fill95 percent of the market.
By KRISTEN GERENCHER
MARKETWATCH
SAN FRANCISCO -- U.S. consumers and employers missed out on $20 billion in savings last year through the purchase of expensive brand-name drugs instead of lower-cost generics, according to a new study.
Increased use of generic drugs has emerged as a major strategy to combat rapidly rising health-care costs in the last few years, and more employers are providing financial incentives such as lower co-payments in their prescription-drug plans to persuade workers to make the switch.
The most dramatic savings to be had are for generics that treat gastrointestinal problems, the substitution of which may shave $5.4 billion from costs, according to a report from Express Scripts, a St. Louis-based company that administers employers' prescription-drug benefits. The study looked at patterns of about 3 million commercially insured people using six categories of drugs.
Generics that treat stomach distress could capture as much as 95 percent of the market vs. today's 31 percent, the study said. Overall, generic drugs cost $60 less on average than their brand-name counterparts.
Losing patent protection
The stakes are high because branded drugs representing nearly $38 billion in sales will lose patent protection between now and 2008, giving consumers and employers many opportunities to choose less-expensive generic alternatives, said Dr. Steve Miller, co-author of the study and vice president for research at Express Scripts.
"What's really cool about it is ... it requires no expense," Miller said. "You don't have to build a new facility; you don't have to put in electronic medical records. This is just patients being empowered to ask their physicians, 'Is there a generic?"'
In the past, patients often didn't question their doctor's prescription choices, even when a sample of a branded drug given at the office subjected them to long-term therapy that proved costlier than needed, he said.
Many consumer groups support the use of generic drugs to control costs, as long as doctors can keep prescribing brand drugs in a minority of cases where it may make a difference, said Gary Claxton, vice president and director of the health-care marketplace project for the Kaiser Family Foundation.
"This is kind of the easiest thing out there to do and obviously it's not getting done as much as it could be," Claxton said.
Express Scripts' clients saved an estimated $9 billion by buying generics in 2005, Miller said.
Some states are seeing better results from the strategy than others, though most are seeing generics used about 50 percent of the time.
Best rates
The states with the highest proportion of generic drugs prescribed were Oregon, Massachusetts and New Mexico, which had 56 percent each, the study said. New Jersey ranked the lowest, with a generic "fill rate" of 41 percent, and New York wasn't much better with 43 percent.
States with the best rates often find success because they have regulations that encourage use of generics, are home to many employers with benefit plans that support their use or have educational programs for doctors and patients, Miller said. Disease prevalence also differs among regions.
The states with the highest potential for savings from generic drugs are California and Texas, which could each save $1.5 billion, the study said. New York, Florida, Pennsylvania and Ohio could each save $1 billion.
Some restrictions
The strategy has some limitations. Generic switching occurs when a patient swaps chemically identical compounds, but therapeutic switching -- between drugs with slightly different chemical makeups -- can be more complex and challenging, he said.
For example, research suggests most people taking cholesterol-lowering drugs could achieve the same results by taking generic lovastatin, though it is chemically different from Lipitor, also known as atorvastatin, Miller said. Only 20 percent of people who take Lipitor, the world's top-selling drug, need to get the maximum benefit it offers, he said.
"Lipitor should probably be reserved for people who need the biggest drop in cholesterol," Miller said.
"For some patients, they will need the higher potency that the newer drug can provide but for the vast majority of patients, that's not required so you're overpaying for what you actually need," he said. "A better strategy would be to treat the majority of us with the most cost-effective agent, reserving the most expensive one for those who truly need it."
Currently there is no generic equivalent for Lipitor, which rang up U.S. sales of $7.7 billion last year, according to IMS Health. Pfizer, which makes the blockbuster drug, has been engaged in patent litigation with generic pharmaceutical firms in both the United States and Europe to try to prevent them from making generic versions of Lipitor. A decision in the case is expected in the next few months.
Express Scripts said it thinks generics could fill 70 percent of the market for the anti-cholesterol class of drugs, which had only 7 percent generic usage in 2004. Filling in the gap could produce savings of $5.1 billion annually, according to the study.
Not always feasible
Even so, moving patients to less expensive generics isn't always a no-brainer.
Because of the delicate nature of treating depression, doctors may be reluctant to deviate from a drug therapy that's working well for the patient, Claxton said. "People are not as comfortable switching [patients] on those drugs."
Express Scripts said generics could fill 75 percent of the demand for antidepressants. That's higher than the 41 percent of the time that generic antidepressants were dispensed last year and represents potential savings of $3.2 billion, the company said.
"We're really shooting for what we think is achievable, not some pie in the sky," Miller said.
The generic fill rate for drugs that treat high blood pressure was 48 percent last year, but Express Scripts gave the category a target of 75 percent for a projected savings of $2 billion.
Painkillers known as nonsteroidal anti-inflammatory drugs or NSAIDs had a 47 percent generic fill rate last year. The study said that class could reach 85 percent generics for a savings of $3.9 billion. And calcium channel blockers should hit a 90 percent generic fill rate and produce savings of $484 million, up from 43 percent usage in 2004, the study said.
Generic substitution among chemically identical drugs doesn't require even a phone call to the doctor when a pharmacist asks a patient if it's acceptable to switch.
The savings generics offer have been driving employers toward tiered pharmacy benefits with various levels of cost-sharing, Claxton said. For example, a generic drug might cost $10 out of pocket compared with $25 for a preferred brand-name drug and twice that for a nonpreferred brand to steer the patient toward generics when possible.