TAKING ACTION AGAINST RISING GENERIC PRICES

Transcription

1 TAKING ACTION AGAINST RISING GENERIC PRICES Copyright 2016 Argus Health Systems, Inc.

2 With generic drug prices increasing, it s time to develop new strategies to support optimal clinical and financial outcomes. Introduction In today s rapidly evolving healthcare market, health plans are continuously challenged to identify the best opportunities to reduce costs while providing high-quality care. The trend of rising generic costs is becoming one of the top concerns of health plans. 1 While generic drugs still generally provide the best value (see Figure 1), a wide variance in generic drug pricing warrants a deeper look into the dynamics of the marketplace. About 15% of generic claims now cost more than $50 per month, and 4% cost more than $100 per month. 2 By choosing a generic, providers may think they are selecting the treatment option with the lowest price and greatest value but this may not always be true. Considering the dynamics in today s generic market, now is an opportune time to analyze the historical and current trends in generic pricing and identify strategies to manage against these rising prices. Figure 1: Prescription Drugs Filled and Expenditures (2014) 3 2

3 Historical and Current Trends in Generic Pricing Prices and pricing for medications is a study in dichotomy. Manufacturers generally set drug prices at a level they believe the market will bear. Medications under patent protection (single source/brand medications) command prices much higher than generics due to limited competition. Before recent developments in generic pricing, medications without patent protection (multi-source/generics) were substantially lower in price due to supply and demand principles. Generic prices have also been lower because generic drug manufacturers do not pay for the costly clinical trials required for branded drugs and generally do not pay for advertising, marketing, and promotion. 4 Historically, once two generic drugs were available as alternatives to a branded drug, generic drug prices came down substantially; prices typically declined even further as additional generics were introduced to the market (see Figure 2). Figure 2: Historical Impact of Competition on Generic Drug Prices 5 The composition of generic drug expenditures has changed since the advent of the Walmart $4 generic list. 6 Based on our experience, we estimate approximately 30% of generics dispensed now cost the healthcare consumer less than $10 per month and are often free to the health plan (100% paid for by the healthcare consumer). In addition, some generics are also free of charge to the healthcare consumer. While this subset of the market leads to lower health plan costs, of late there has been growth in the number of generic medications that cost more than $50 per month. We loosely define these as high-priced generics. In our experience, high-priced generics account for over 50% of plan generic spend. 3

4 A recent analysis shows thousands of generic drug prices have increased over the past several years (2008 to 2015). Almost 400 generic drugs grew in price by more than 1,000%, and approximately 3,500 generic drugs grew in price by more than 100% (see Figure 3). Figure 3: Recent Increases in Generic Drug Pricing (2008 to 2015) 7 In this analysis, prices shifted for 9,613 generic drugs and remained the same for 11,393 generic drugs. Total generic drugs in analysis = 21,006. Several explanations have been suggested for the dramatic increase in high-priced generics, 8, 9,10 including: Generic manufacturer consolidation Shortage of raw materials FDA disciplinary action after inspecting generic drug manufacturing processes Lengthy delay in FDA approval process for new manufacturers Aging drugs with limited usage similar to limited distribution drugs/orphan status Claims of price gouging Each of these contributing factors is expected to remain in the near term. As such, generic prices are likely to continue their upward price trend. 4

5 The Need for Greater Price Transparency Although many high-priced generics have a lower-cost generic treatment option available, physicians and other healthcare providers are often unaware of price differences. For providers to select the therapy with the greatest value (efficacy, safety, and appropriate price), generic price information must become available to providers so they can take this into consideration and discuss this with patients when making treatment decisions. Demonstrating the need for greater price visibility, a recent consumer survey revealed that three out of five Americans never ask their physician about the cost of medical services, and about one-third indicated this is because they don t believe their physician will know the cost. 11 As the cost burden shifts to healthcare consumers through high-deductible health insurance plans, consumers will increasingly need their physicians to provide greater price visibility into services. Consumers may not even consider there could be variations in the price of generics; they might think the term generics automatically implies a low price. Tools to help consumers understand medication pricing and find potential alternative sources independent of the health plan/pharmacy Benefit Manager (PBM) are available and increasing in number. Unfortunately, when consumers purchase prescription drugs through alternative sources, the prescription drug claims may not be submitted for adjudication. This would result in incomplete health plan and PBM data, which could negatively affect adherence reporting and clinical programs. Finding Opportunities to Reduce Spend While Supporting High-Quality Care We ve looked at some of the reasons for the changing generic landscape and increasing prices. Now we need to answer the question: What can be done to better manage these increasing prices? Responding to this trend, health plans are deploying traditional utilization management strategies of prior authorization and shifting costs to consumers through higher-tier copays for select medications. They are also monitoring maximum allowable cost lists and adjusting where needed. 12 But these steps may not be enough. In addition to these strategies, health plans need new ways to promote price transparency and support the use of lower-cost generic drugs when appropriate alternatives to high-priced generics are available. 5

6 Generic Drug Pricing Analysis To help health plans identify opportunities for savings in generic drug spend, Argus can facilitate a generic drug pricing analysis that segments generic claims into cost categories such as <$10, $10-$25, $25-$50, $50-$100, $100-$200, and greater than $200. Figure 4 shows an illustrative example of drug classes for claims costing $100-$200. In this example, the drug classes are attention deficit hyperactivity disorder (ADHD) drugs; dermatological therapies glucocorticoids and combinations; antihyperlipidemics; acne therapy (topical); CNS stimulants amphetamines and combinations. Figure 4: Generic Drugs That Cost $100 to $200: Top 5 Drug Categories 13 Percentages based on Argus ingredient cost. 6

7 The Argus clinical and data analytics team looked at the profile of high-priced generic drugs and found that over 70% have a safe and effective alternative generic option available for less than $ Figure 5 shows an example of a generic drug pricing analysis in the form of a bubble plot for the category of steroid creams. Additional bubble plots for other drug classes are provided in the Appendix. Figure 5: Generic Steroid Creams Bubble Plot, Illustrative Example 15 Dots/bubbles = different generic drugs; Size = total spend for the drug Average Cost Per Rx (USD) High Cost Medium Use Low Cost High Use Prescription Count Clobetasol Propionate Prescription Count: 235 Avg Cost Per Rx: $ Total Spend: $62,368 Triamcinolone Acetonide Prescription Count: 664 Avg Cost Per Rx: $8.81 Total Spend: $5,847 This bubble plot reveals wide variability in pricing and total health plan spend for generic steroid creams. The small bubble (a small dot) on the far right bottom corner shows a lowcost generic option that is frequently prescribed. This place on the chart shows high use and low cost. This is an ideal scenario and represents an opportunity to support this pattern of prescribing for additional patients who may benefit from this therapy. The largest bubble near the center shows medium use and high cost. This may represent an opportunity to educate prescribers and healthcare consumers about potential appropriate lower-cost options. Using similar methodologies, Argus can provide an analysis to help health plans identify their greatest opportunities to decrease spend while supporting the use of the most appropriate costeffective generic drugs. Once key opportunities are identified, we can work with health plans to develop strategies to provide drug pricing information to physicians. 7

8 Real-Time Benefit Check To assist with price transparency, Argus is pursuing a real-time benefit check solution to help providers select the most appropriate, cost-effective treatment options for individual patients. The real-time benefit check will highlight a patient s financial responsibility for selected medications at the time of prescribing. This patient-specific pharmacy benefit information at the point of care gives providers the information they need to determine the most appropriate treatment while taking price into consideration. The service will be integrated into the electronic medical record e-prescribing workflow to complement existing processes. Our real-time benefit check service will answer NCPDP standard questions about drug costs, such as: 16 What is the patient s financial responsibility for a proposed medication? Are there any coverage restrictions that may prevent the proposed medication from being covered? Are there any formulary drugs that are less expensive and equally effective? What is the total cost of the selected medication to the healthcare system (cost to health plan and patient combined)? Example of details provided to a physician in a real-time benefit check for an ADHD drug: Internal Note Generic Drug Pharmacy Member Cost Plan Cost Requested Drug Concerta (methylphenidate ER) Pharmacy ABC $30.80 $ Alternative Adderall (dextroamphetamine/amphetamine) Pharmacy ABC $13.20 $52.80 Alternative Focalin (dexmethylphenidate HCl) Pharmacy ABC $12.00 $48.00 Alternative Ritalin (methylphenidate HCl) Pharmacy ABC $10.20 $40.80 Note: In this example cost estimates are based on a 20% member coinsurance. 8

9 Re-Evaluating Business Relationships Health plans may also want to consider the generic drug pricing structure of pharmacy distributors who are also claims processors. The PBM value proposition is the ability to save their clients money on drug spend. However, PBMs traditionally make a percentage of the drug spend, which can create a misalignment to client objectives. A traditional PBM makes at least 10 times more profit with a $100 generic compared to a $10 generic medication. Argus follows a different business model, receiving a fixed transaction fee instead of a percentage. With this model, Argus receives the same transaction fee whether the drug is a $10 generic or a $100 generic. We have no financial gain to help fulfill the higher-cost alternative. As such, our pricing model is aligned with client and consumer cost and care goals. Conclusion Since the factors contributing to increasing generic drug prices are likely to remain or even accelerate in the coming years, health plans should anticipate the continued increases in plan costs. The impact of doing nothing is significant when drug prices are too high, patients often become nonadherent to therapy, leading to worsening clinical and financial outcomes. There are many opportunities to develop solutions and find ways to promote price transparency through better communication. With generic drug prices rising, it s time to explore alternatives for the generic alternative. AJ Ally, R.Ph., MBA Vice President of Clinical Operations ajally@argushealth.com Mark Gruenhaupt, R.Ph. Clinical Relations Executive mark.gruenhaupt@argushealth.com Dawn Parsons, R.Ph., MBA Senior Director of Clinical & Business Analytics dmparsons@argushealth.com Rahul Singal, MD Chief Medical Officer rdsingal@argushealth.com 9

10 Appendix High-priced generics are frequently prescribed in the following drug classes: ADHD drugs, antidepressants, antifungal creams, drugs used to treat high triglycerides, and steroid creams. The bubble plot charts in Figure 5 and in this Appendix show high variability in pricing and total health plan spend for generic drugs in these five categories. 17 This data can help health plans identify where ideal use of low-cost generic drug options is occurring vs. medium or high use of high-cost options (problematic when appropriate lower-cost options are available). This analysis can guide health plans in developing strategies to reduce generic drug spend while supporting high quality care. ADHD Drugs Dots/bubbles = different generic drugs; Size = total spend for the drug Average Cost Per Rx (USD) High Cost High Use Prescription Count Dextroamphetamine/ amphetamine Prescription Count: 776 Avg Cost Per Rx: $ Total Spend: $139,418 ADHD: The large bubble on the far right reveals high use of a relatively high-cost generic drug. This may represent an opportunity to educate prescribers and healthcare consumers about potential appropriate lower-cost options. 10

11 Antidepressants Dots/bubbles = different generic drugs; Size = total spend for the drug Average Cost Per Rx (USD) Low Cost High Use Prescription Count Sertraline HCl Prescription Count: 3,378 Avg Cost Per Rx: $4.20 Total Spend: $14,202 Antidepressants: The smaller bubbles on the far right bottom corner show low-cost generic options that are frequently prescribed. These are ideal scenarios and represent an opportunity to support this pattern of prescribing for additional patients who may benefit from these lowercost generic drugs. 11

12 Antifungal Creams Dots/bubbles = different generic drugs; Size = total spend for the drug Average Cost Per Rx (USD) Medium Cost High Use Prescription Count Ketoconazole Prescription Count: 152 Avg Cost Per Rx: $38.61 Total Spend: $5,868 Antifungal creams: The large bubble on the far right bottom corner shows a medium-cost generic option that is frequently prescribed. This may represent an opportunity to educate prescribers and healthcare consumers about potentially appropriate lower-cost options. 12

13 High Triglycerides Dots/bubbles = different generic drugs; Size = total spend for the drug Average Cost Per Rx (USD) High Cost Medium Use Low Cost High Use Prescription Count Fenofibrate Prescription Count: 461 Avg Cost Per Rx: $ Total Spend: $51,747 Gemfibrozil Prescription Count: 845 Avg Cost Per Rx: $11.11 Total Spend: $9,389 High triglycerides: The small bubble on the far right shows a low-cost, frequently prescribed generic option for the treatement of high triglycerides. This place on the chart shows high use and low cost, an ideal scenario. The largest bubble near the center shows medium use and higher cost. This may represent an opportunity to educate prescribers and healthcare consumers about lower-cost options. 13

14 References 1 AIS Health Data. As generic prices rise, PBM plans include tiers, MAC tweaks. aishealthdata.com/news/generic-prices-rise-pbm-plans-include-tiers-mac-tweaks. Accessed December 4, Argus paid claims data, Merrick D. What is increasing the cost of generic drugs? National Center for Policy Analysis, Policy Report No. 371, September Accessed December 4, FDA. Facts about generic drugs. BuyingUsingMedicineSafely/UnderstandingGenericDrugs/ucm htm. Accessed December 9, Merrick D. What is increasing the cost of generic drugs? National Center for Policy Analysis, Policy Report No. 371, September Accessed December 4, Choudhry NK, Shrank WH. Four-dollar generics increased accessibility, impaired quality assurance. N Engl J Med. 2010;363(20): MarketWatch. Why drug prices remain insanely high and 6 things you can do to save. Accessed December 4, AIS Health Data. As generic prices rise, PBM plans include tiers, MAC tweaks. aishealthdata.com/news/generic-prices-rise-pbm-plans-include-tiers-mac-tweaks. Accessed December 4, Merrick D. What is increasing the cost of generic drugs? National Center for Policy Analysis, Policy Report No. 371, September Accessed December 4, Alpern JD, Stauffer WM, Kesselheim AS. High-cost generic drugs implications for patients and policymakers. N Engl J Med. 2014;371(20): Business Wire. Medical costs seriously impact household budgets, yet Americans don t manage health care costs. Two-thirds of Americans surprised by medical bill in the past 12 months. September 30, 2015 news report. home/ /en#.vhv1xplvhbf. Accessed December 4,

15 12 AIS Health Data. As generic prices rise, PBM plans include tiers, MAC tweaks. aishealthdata.com/news/generic-prices-rise-pbm-plans-include-tiers-mac-tweaks. Accessed December 4, Argus paid claims data, Argus paid claims data, Argus paid claims data, Healthit.gov. NCPDP Real-Time Benefit Check Briefing Health IT Standards Committee. Accessed December 4, Argus paid claims data, AR-WP-HighPriceGenerics