Healthy Skepticism Library item: 2182

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Publication type: news

Winslow R, Martinez B.
Pharmacy-Benefit Managers Launch Aggressive Bids to Lower Drug Costs
The Wall Street Journal 2001 Aug 20

Full text:

Worried about rising pharmaceutical costs, companies that manage health benefits for millions of Americans are launching aggressive efforts to switch consumers from brand-name pills to cheaper generic drugs.

One target is the antidepressant drug Prozac. Merck-Medco, the pharmacy-benefit unit of drug maker Merck & Co., Whitehouse Station, N.J., plans to announce Monday that it has persuaded doctors to change the Prozac prescriptions of 15,000 to 20,000 patients to the new generic-drug fluoxetine since patent protections on the brand-name version expired two weeks ago. That includes about 80% of mail-order prescriptions it filled for the pill. Typically, generics grab about 50% of a brand’s market share within six months.

In another effort, Blue Cross Blue Shield of Michigan, which provides health-insurance coverage for about half of Michigan residents, is initiating a campaign called “Generic Drugs, the Unadvertised Brand,” to boost the percentage of generic prescriptions among its beneficiaries. The nonprofit Detroit insurer is announcing a competition among the state’s retail pharmacies to increase the percentage of prescriptions filled with generics instead of brand-name drugs.

Frustration Over Costs

The initiatives reflect growing frustration among insurers and employers over the cost of prescription drugs and the pharmaceutical industry’s ability to promote them with potent direct-to-consumer advertising.

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Going Generic
Top selling drugs losing patents

Drug Condition Company Patent Expires
Prozac Depression Eli Lilly August 2001
Prilosec Ulcers Astra Zeneca October 2001
Mevacor High cholesterol Merck December 2001
Prinivil/Zestril High blood pressure; heart failure Merck/Astra Zeneca July 2002
Claritin Hay fever, allergies Schering-Plough December 2002

Source: Blue Cross Blue Shield of Michigan

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They also signal an emerging opportunity for significant savings on pharmaceutical costs. In addition to Prozac, several other major brand-name drugs are about to come off patent, including Prilosec, London-based AstraZeneca PLC’s top-selling ulcer drug, and Claritin, an allergy remedy from Schering-Plough Corp., Madison, N.J.

“It’s a real opportunity we have to make a difference,” said Richard T. Cole, a senior vice president at the Michigan insurer, who is directing the campaign. “Prescription drugs are having a tremendous negative impact on our overall ability to contain [health-care] costs.”

A drug such as Prozac is a particularly tempting target. Marketed by Eli Lilly & Co., Indianapolis, it racked up U.S. sales of $2.7 billion in 2000, making it the nation’s fifth-largest-selling drug, according to IMS Health, a Westport, Conn., drug market research firm. Within days of generic fluoxetine’s arrival on the market, Merck-Medco said it contacted more than 25,000 of the top Prozac-prescribing doctors to urge them to switch, significantly more physicians than it had reached as quickly when other branded medicines went off patent. The first generic Prozac to reach the market is made by Barr Laboratories Inc., Pomona, N.Y.

Eli Lilly could not be reached for a comment.

Big Savings Seen

Merck-Medco, which provides drug benefits for more than 65 million Americans, said its customers and members could save more than $40 million over the next six months if the conversions to fluoxetine continue at the initial pace. For employers and health plans, that is a 20% to 40% savings from what they would have paid for Prozac.

Other pharmacy-benefit concerns are also seizing the opportunity. Express Scripts Inc., a Maryland Heights, Mo., drug-benefits manager with 47 million members, persuaded 75% of doctors who specifically prescribed Prozac — using a “dispense as written” box on the prescription form — to switch to generic fluoxetine since it became available.

“This is probably one of the fastest conversions to generics that we’ve ever seen,” said Daniel Cordes, vice president of pharmacy services at Express Scripts.

AdvancePCS, an Irving, Texas, drug-benefits manager with 75 million members, plans to remove Prozac from its “preferred brand” list on Oct. 1. That means generic fluoxetine could cost some consumers as little as $5 out of pocket, compared with as much as $30 for Prozac.

A Broader Approach

In Michigan, Blue Cross officials are taking a broader approach, seeking to increase the use of a long list of generics already on the market.

The insurer is also eagerly awaiting the arrival of a generic version of Prilosec, which is expected to go off patent in October. It spent $109 million on the drug last year, more than it paid for any other pill.

Pharmacies that win Blue Cross’s contest to fill more prescriptions with generics in the fourth quarter will be featured in a million-dollar advertising campaign that the insurer will unveil next spring.

General Motors Corp., the insurer’s biggest customer, and the Metropolitan Detroit Chamber of Commerce will help it promote generics.

Blue Cross says it spends more than $2 billion a year on prescription drugs, 75% of which goes for brand-name medicines. About 38% of prescriptions written in Michigan are for generics.

If the campaign could increase that by just three percentage points, to 41%, Blue Cross and its rival insurers would spend a total of $100 million less on pharmaceuticals, Mr. Cole said.