Cubic News

What can the VA system teach Canadian plan sponsors?

February 2011

Hayley Fleming, RPh, BScPhm (hfleming@cubichealth.ca)

Is there value in paying for expensive, brand name drug in cases where cost-effective generic alternatives exist?

In an effort to evaluate prescribing patterns for the use of brand vs. generic drugs, and understand whether higher per-capita spending on drugs for the treatment of high cholesterol and diabetes translated into better quality measures, a recent study looked at prescription drug use in these areas in the Veteran’s Affairs (VA) Healthcare System, one of the largest integrated healthcare systems in the United States.

Using aggregate data collected from 135 VA Medical Centres across the US in 2008 (representing 2.3 million patients who were dispensed cholesterol-lowering medications and over 980,000 patients who were dispensed diabetes medications), the study discovered that higher per-capita spending for these drugs was due to the utilization of more expensive brand name products. This finding was not a surprise, given that on average, generic alternatives were available for as little as 10%-20% of the acquisition cost of comparable brand name drugs at the time in the US marketplace.

More importantly, the study demonstrated that there was no difference in the quality scores measured between plan members with higher drug spending (i.e. using higher cost brand drugs) compared to those with lower spending (i.e. using more cost-effective generic drugs).

In addition, the prescribing patterns from medical centres with the highest per-capita spending were such that patients at these medical centres were also more likely to have higher utilization of brand name drugs in other drug classes as well.

It is surprising to see the variability in prescribing patterns within the VA Healthcare System given that they operate with a closely managed drug formulary, and offer a uniform prescription benefit with standardized drug pricing from institution to institution. In addition, VA practitioners have access to identical clinical tools to help guide the appropriate use of non-formulary medications. This would suggest that unnecessary spending on more expensive brand name products in areas where a number of cost-effective alternatives exist that offer the same benefit may be even greater among those plans that do not have similar drug plan management strategies in place.

Although many Canadian plan sponsors have generic substitution policies in place, such a provision alone is not enough to ensure cost-effective use across a plan. The average generic penetration rate (by number of claims) among Canadian employer-sponsored drug plans in 2009 was only 44.8% – a proportion that is 34% lower than the average generic dispensing rate of 67.5% in the United States during the same period (according to the 2010 Medco Drug Trend Report).

Generic substitution policies only target the utilization of older multi-source brand drugs that have lost their patent, and has no impact on claims for single-source drugs like Crestor®, Nexium®, and Cipralex® – drugs commonly among the most expensive within the plan experience of many Canadian employers. These single-source drugs do not have exact generic equivalents, but do have several cost-effective therapeutic alternatives that are just as safe and effective.

These findings highlight the opportunity for plan savings while maintaining the same level of care for plan members, and the need for Canadian plan sponsors to move beyond just a Mandatory Generic Substitution policy. Plan design is the sole reason why generic utilization rates in Canada are much lower than in the United States. The solution is an appropriate plan design that does not adversely impact plan members, and continues to enable coverage for more expensive products that have no cost-effective alternatives on the market. Plan member education is also a critical component to successful plan redesign in this area.

References

Gellad WF, Good CB, Lowe JC, Donohue JM. Variation in Prescription Use and Spending for Lipid-Lowering and Diabetes Medications in the Veterans Affairs Healthcare System Am J Manag Care. 2010; 16(10):741-750. Accessed January 6, 2010. Available:http://www.ajmc.com/media/pdf/AJMC_10oct_Gellad_741to750.pdf

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