Generic Drug Opportunities

Some very high volume, high cost drugs are scheduled to go off patent over the next couple of years. If these drugs go off patent as scheduled, plan sponsors will see savings as prescriptions for these drugs are converted to less costly generic drugs. Some of these drugs are listed in a table below.

Of course, this schedule is not guaranteed. The patent expiration for individual drugs may change based upon litigation and other pharmaceutical company efforts. In fact, the manufacturers of several of these drugs are actively pursuing patent extension. Also, the FTC recently announced an investigation into purported practices by brand drug and generic drug manufacturers that slow the introduction of generic drugs.

Because of the expanded use of three-tier cost sharing schemes and formulary design, it is important that plan sponsors monitor this and related activity.

First, these drugs must be added to your PBM's MAC list. This is the mechanism by which the PBM accomplishes the quickest and greatest movement from brand to generic. Normally, this will not occur until the generic drug is available from multiple generic manufacturers. PBMs that do not update their MAC lists frequently may be slow to add these drugs to their MAC list. The longer they delay, the more money plan sponsors pay.

Second, all things being equal, the PBM's formulary should be designed to encourage the use of drugs for which generics will soon be available. It is important that plan sponsors know whether the drugs listed in the table above are considered preferred by their formulary. If the formulary currently prefers one of these drugs, it may not be in your best interest for the formulary to change and prefer a drug for which the patent is not scheduled to expire in the near future (unless some new quality related information is provided). Such a change may be designed to increase rebates; however, while rebates may increase, this does not necessarily translate into lower costs for the sponsor.

Generally speaking, it should be adequate to simply ask your PBM for information about these products. Periodically review whether these drugs are yet available generically and whether they have been added to the MAC list. For those who are interested, information about generic approvals is available on the Internet at the FDA's web site: http://www.fda.gov/cder/approval/index.htm.