Many common medical conditions are successfully – and affordably – treated with generic prescriptions. While generics are required by law to provide the same active ingredient, quality, and therapeutic value as brand name pharmaceuticals, the big difference is price.
Generics provide high value to patients and plan sponsors for the most part. On average, consumers pay just $6.06 for a generic prescription at the pharmacy. The average brand copayment is more than $40, nearly 7 times the cost out of pocket. About 90% of all prescriptions filled are generics, but only account for 23% of all drug costs. This is great news for schools trying to keep their health benefit expenses under control.
Today we’re seeing large increases in the cost of some generic drugs that were once priced reasonably. While we’ve seen cases of unscrupulous drug companies raising prices by hundreds of dollars because they have no competition, factors such as raw material shortages, industry consolidation and low demand for products that treat rare conditions are driving this trend.
“On average, consumers pay just $6.06 for a generic prescription at the pharmacy.”
These generic price increases are being addressed on the consumer side through formulary management. A drug formulary is a list of prescription medications indicating which drugs will be approved or disapproved for payment by a health plan. Formularies are usually arranged in three or more tiers, with the first tier containing the lowest cost products and the consumer’s smallest copayment. Higher cost generics are now moving into the second tier along with preferred brand name prescriptions. Patients pay a higher copayment in the second tier.
Many health care consumers view formularies negatively because it restricts their medication choices. It’s true that formularies do place limits on selecting prescriptions, but also assist patients in making decisions about cost vs. benefits. However, formularies can also impact manufacturer and distributor practices as well. Having a drug on the second tier instead of the first will significantly decrease its utilization, and thus affect its sales. This introduces a degree of market competition that can encourage price reductions.
Communication between patients and health care providers is the best consumer tool to receive the most value from prescriptions and pharmacy. Understanding all the choices, patients and their doctors can decide on treatment that’s both cost-effective and affordable.