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May 09, 2018

Brand Name vs. Generic Pharmacy Drug Costs: One Solution To Control Your Group Health Care Costs In Ohio

It’s no secret health care costs in the United States have been rising steadily for the past two decades and, with them, pharmacy drug costs.

It’s become less and less affordable to get brand name drugs and medications, with no reprieve in sight.

The Centers for Medicare and Medicaid Services (CMS) projects that by 2022 prescription drug costs will grow to $355 billion.

In contrast, $40.3 billion was spent on prescription drugs in 1990.

With pharmacy drug costs increasing at a faster rate than other health spending, now is the time for you to review your drug cost-saving options.

Ensuring your employees have the correct medications is important for their health and your bottom line.

Employees who only use brand name drugs might forego their prescriptions in order to save money.

This leads to lost productivity, increased employee stress and a whole host of issues related to not taking prescription medication.

Alternatively, some employees might have a variety of brand name drugs they take.

While it’s good that they are taking their medications and staying healthy, using only brand name drugs means higher costs for employers, plan sponsors and the end users - the employees.

What can employers do to lower drug costs?

Encourage employees to turn to generic medicine as a way to reduce expenses.

Although an increasing amount of consumers are switching to generic drugs, a large segment of the population doesn’t know the difference between brand name and generic medication.

Here’s how it works:

When a new medicine is invented, a patent is filed so that no other company may reproduce that drug.

While the patent is current, companies can charge a much higher price for the drug because there is no competition. In addition, companies often spend large amounts of money for advertising and promotion, further increasing the cost of the brand name medication.

When a medication’s patent expires, other companies may produce the drug, creating generic medications.

Because of the increased competition, and because these other companies rarely spend money on advertising, the price of the generic drug is significantly lower.

Are generic drugs safe?

A common misconception among consumers is that a generic medication is inferior to a brand name medication.

In actuality, a generic drug is identical to a name brand drug in dosage, form, safety, strength, route of administration, quality, performance, characteristics and intended use.

In addition, any generic medication approved by the Food and Drug Administration (FDA) must pass the same stringent standards as brand name drugs.

To gain FDA approval, a generic drug must:

  • Contain the same active ingredients as the innovator drug
  • Be identical in strength, dosage, form and route of administration
  • Have the same use indicators
  • Meet the same batch requirements of identity, strength, purity and quality
  • Be manufactured under the same strict standards of the FDA’s good manufacturer  practice regulations required for innovator products

Here’s the benefits of generic drugs:

Due to advertising, marketing, promotion and other costs, brand name drugs prices are significantly higher than generic medication costs.

Generic drugs can sometimes be misunderstood as subpar or not to the same quality standards as brand name prescription drugs.

But as mentioned above, generic drugs are not only of the same high quality as brand name prescriptions, but they usually cost up to 80-85% less than brand name drugs.

In fact, the US saved nearly $1.5 trillion over the past 10 years by using generic drugs, according to Anthem.

Moreover, according to the US Food and Drug Administration (FDA), “Generic drugs are important options that allow greater access to health care for all Americans. They are copies of brand-name drugs and are the same as those brand-name drugs in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.”

If generic drugs are of the same high quality as brand name drugs and they cost less, why isn’t everyone using them?

The problem could be employee education.

Teach your employees the value of buying generic so they can save money - for you and themselves.

Start by clicking here to download our free “Know Your Benefits” one-pager that educates your employees on the benefits of generic drugs.

Benefits of Generic Medications

According to the FDA, generic medications save $3 billion every week and more than $150 billion annually. Boosting the use of generic medications by incorporating the strategies of consumer driven health plans into your prescription coverage design can potentially save you and your employees significant money.

A good way to begin employee education is by integrating information about generic drugs into your employee benefits communication strategy. Send informational articles or emails to employees explaining the differences between generic and brand name medications and encourage them to request generics when filling a prescription.

To maximize generic use, keep employees up to date on the newest approved generic medications through this FDA resource or by utilizing the FDA’s Orange Book, which allows you to search for generic drugs based on a variety of characteristics.

To get started on educating your employees about generic drugs, send them this FDA Generic Drug Approval Checklist.

Save on Specialty Drugs

Speciality drugs are very expensive and used to treat complex conditions, like cancer, hemophilia or multiple sclerosis.

Individuals who need these medications must often be monitored by their physician, who assesses whether the medications are working.

Additionally, these drugs usually require complicated applications, like an injection or infusion, adding to the price.

Look for ways to reduce specialty drug costs because experts predict their utilization and price will only increase.

Specialty drug spending is predicted to surpass traditional pharmacy spending by 2018, according to the National Business Group on Health (NBGH).

Moreover, the group says specialty drugs are the fastest growing cost in many employers’ health benefits.

The NBGH offers some suggestions for employers looking to curb their specialty drug spending:

  • Develop a comprehensive utilization strategy for the company, based on necessity and eligibility.
  • Use a step program, so employees must try generic drugs before moving to more costly alternatives.
  • Place quantity limits on drugs so employees use the correct dosage.
  • Consider excluding the most expensive drugs, if cheaper alternatives are available.
  • Consider moving some specialty drugs to the pharmacy benefit instead of medical benefit, increasing cost control and oversight.
  • Utilize a preferred network of pharmacies to help lower costs.
  • Talk with your pharmacy benefit manager (PBM) to make sure you are apprised of any new drug changes or market developments.

Bottom Line

The cost of name-brand drugs is one of the main factors contributing to year-after-year rising rates of your group healthcare.

Educating your employees on brand name drugs vs. generic drugs can result in drastic savings on your group healthcare.

Next Step

Let’s talk. My name is Ty Reid and I’m the Director of Worksite Benefits here at The O’Neill Group. I’d love to review your benefits program and analyze your data to determine other cost-saving solutions for your group benefits program.

Click here to schedule a brief phone call on my calendar at a time that's convenient for you. I look forward to hearing from you.

Schedule a Meeting with Tyler Reid