Cubic News

Carpe Diem – Savings with Generics in 2011

June 2011

A new study at the University of British Columbia suggested that Canada could save almost $1.3 billion per year if all provinces followed the pricing model for generic drugs implemented by the publicly-funded Ontario Drug Benefit (ODB) Program, which has generics at 25% of their brand comparator price.  For plans in the private sector, the combination of staged decreases in generic pricing in various regions across the country plus recent/pending releases of generic versions of commonly prescribed brand products like Lipitor® (for high cholesterol), Avapro® (for high blood pressure) and Nexium® (for stomach hyperacidity) should result in material savings – provided that plan members are actually using the generics.

New Cubic Health research on over $700,000,000 worth of private sector drug claims from the past two years showed very disappointing improvements in generic drug penetration rates (i.e. by number of claims) for working age populations across Canada, with the utilization of generic drugs increasing by only 1.8% year-over-year (YOY).

This research further showed that while generic penetration rates increased within key drug classes such as the statins for high cholesterol and the proton pump inhibitors for stomach acidity, the proportions of claims attributed to generics were still suboptimal considering the number of generic options available within these classes.  In fact, generic utilization within the two most common antidepressant drug classes combined actually decreased YOY, despite the fact that there are a number of lower-cost generic alternatives that are just as safe and effective as comparative brand drugs.

With the 2010 Cubic Health National Benchmark generic penetration rate at only 45.1% for working age populations, the majority of all drug claims among working age populations across the country are still for brand name drugs.  With cost-containment and plan optimization currently ranking as top priorities for most Canadian plan sponsors, it is worth considering strategies in place in the United States where the generic penetration rate for all drugs filled in 2010 was over 75% [1].  Remarkably, generics are expected represent 85% of all drug claims south of the border by the end of 2012 once a number of other common brand products, currently under patent protection, fall off the “patent cliff’.

How can that be?  In the US, 95% of drug plan structures are reported to be either 3- or 4-tier designs which work to drive plan member behaviour towards more cost-effective alternatives.  Compare that to Canada, where fewer than 5% of plans have any kind of tiered structure in place. 

External forces have created a perfect opportunity for significant savings for Canadian plan sponsors through greater use of cost-effective generic products.  It’s time for sponsors to more aggressively go after those savings. 

 

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