Paying Big Bucks for Nickel and Dime Drugs

| | Evidence Based Medicine, Utilization Review

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Our perception of a brand helps us rank products and services. A logo, name, voice or signature can invoke certain feelings or thoughts that have been imprinted in our psyche. Branding can be so strong as to make it difficult to discern what is founded and what is fallacy. A sustainable brand, however subtle or obvious, is essential for a company to succeed in any industry, including pharmaceuticals. Interestingly, people are using brand name drugs much less frequently now, while generic usage is on the rise. in 2010, the national generic utilization rate was 78 percent. In workers’ compensation (WC), around a quarter of prescriptions for injured workers continue to be filled with brand name drugs, but that small percentage actually accounts for the majority of overall prescription costs to the WC system. Consumer marketing centered on brand name products has created perceptions that have spread into the prescription drug world – a perception that if a drug doesn’t have a brand name label, it isn’t as good. This article looks to dispel the myth that brand is always better by delving into clinical analyses of generic versus non-generic drugs and gives a cost analysis aimed at showing that paying more doesn’t always mean you get more. What is the difference between a brand name drug and a generic drug? Spoiler Alert: A generic drug is the same as a brand name drug. The pharmaceutical company that develops the drug has the patent and receives the profits from the sale of the drug until the patent expires. Once the patent expires, the drug can be manufactured and sold by other companies. FDA guidelines require generic drugs to be identical to the brand name drug in terms of efficacy, safety, usage, route of drug administration, pharmacokinetics and pharmacodynamics. Inactive ingredients can differ between a generic and a brand name drug, although they are basically fillers and offer no value in the drug’s therapeutic effect. As the inactive ingredients could be a little different, in rare cases a person could be sensitive to one of those ingredients (e.g., dye, preservatives and/or flavoring agents). This can be true of the brand name drug or the generic drug; however, it is rare. The reality is consumers are paying higher dollars for a “brand name label” but getting the same efficacy regardless of who manufactures the drug. If generics work the same as brand name drugs, why aren’t we using them? This is a great question, and it can have many different answers. Once a generic drug is on the market, the cost of the drug can drop significantly because now there is competition rather than one pharmaceutical manufacturer inflating prices for big profits. This benefits the population as it helps ensure that life-saving drugs are available at affordable prices. Generics also reduce the overall cost burden to our health care system. Where there is money to be made, companies will capitalize on the opportunities. For example, when a patent expires on a drug, the pharmaceutical company that owns it can apply for a new patent by creating a “new and improved” version of the drug and market it under a new name. Fortunately, to do this, the new version has to go through clinical trials and FDA approval, which can take years and force the pharmaceutical company to compete with its original version available as a generic. Another reason generics are not more prevalent that some physicians and patients prefer a brand name drug versus a generic drug. Finally, in some cases, a generic may not yet be available in a given market. In a healthcare economic system that is already over-burdened, spending billions of dollars for brand name drugs makes little sense in cases where a generic is available. These dollars could be better spent on research, providing healthcare to those who cannot afford it and reaching populations that have little to no healthcare at all. Personal preference is something all consumers value. We like choices, but when tax dollars are supporting higher drug costs without any science that says one is better than the other, we should question what are we doing and we are allowing this. How much does personal preference really cost? Fourteen states allow patients to select brand name drugs when a generic equivalent is available and the brand is deemed not medically necessary. In most cases, the patient is responsible for the difference in cost between the two, and the difference can be staggering. A report by the Generic Pharmaceutical Association found that in 2010, the average co-payment for a generic drug was $6.06 per prescription, compared to $23.65 and $34.77 for preferred and non-preferred brand drugs, respectively, an average of four to five hundred percent higher. As noted earlier, the FDA has strict regulations on how much variation may exist between brand name drugs and their generic counterparts. What this amounts to is a brand name premium for the same active ingredients. One might point to 2014’s generic price spikes as a sign that the price difference between brand name and generic drugs is dwindling; however, the average price of generic drugs has gone down 50 percent since 2008. Congressmen Sanders and Cummings presented reports that showed a 448 increase in the average generic price, , but they seemed to only focus on a minority of the drugs within the industry. And it remains to be seen if the prices will continue to rise, as the cause of those said surges is still a mystery. Fewer manufacturers and supply shortages seem to be key cost drivers, so as new competition arises and the supply begins to meet the demand, the price for those generics should even out. Still, the average price of brand name drugs has nearly doubled since 2008.It may be a while until generic drugs completely overtake their brand name shelf mates. At the industry level, generic drugs are helping to reduce health care costs. In 2010 alone, generic use generated more than $157 billion in savings nationally, with Medicaid paying close to $200 per monthly brand prescription compared to $20 for each monthly generic prescription. The savings do not stop there; Express Scripts estimates that for every one percent increase in generic use, payers can expect a reduction of two percent in prescription drug costs. Despite having close to seven times as many drugs and medications on the market, generics still account for less drug spending than branded products with generic competition. Addressing the outliers This article supports generic drugs, but there are instances in which a brand name drug is the preferred or only option for providers. For example, the FDA announced it would not approve any generic versions of OxyContin when its patent ended. This easily abused medication and lack of an abuse-deterrent in the original formulation was the primary driver in the FDA’s decision. Cheaper alternatives were on the horizon, but the FDA believed the prospects of lowered costs did not outweigh the safety risks, which may have been increased by the introduction of generics. Exceptions like this one help to caution us when we become too focused on cost savings. Conclusion Clearly, a preference for brand names has created a bias within the prescription drug industry – that the original will somehow be better than a replica. However, as stated above, there is no difference in the active ingredients between an original brand name drug and its generic counterpart. Federal regulations do not permit such differences. Could the price differences then, be minuscule enough to warrant a choice of brand familiarity? As this article mentioned, some brand name drugs cost 400 percent more than their generic equivalents. You do not always get what you pay for because the bottom line shows that when there is a generic equivalent available, it is just as effective and costs less than its brand name equivalent. This article was co-authored by Lisa Robinson, Quality and Medical Technology Expert, and Kenny Shiau, a regulatory analyst for UniMed Direct.

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