Health Plans Begin Drive for Generic Drugs

Seeking to rein in soaring prescription drug costs, four of California’s biggest health plans will use financial incentives in a campaign to convert members from expensive brand-name medicines to generic equivalents.

The program, to be launched this week for 15 million members of Blue Cross of California, Blue Shield of California, Health Net of California and PacifiCare Health Systems, will essentially waive the first co-payment for patients willing to try generic versions of certain heavily prescribed drugs.

If successful, the campaign eventually could save tens of millions of dollars a year in drug costs, member co-payments and employer premiums, company executives said over the weekend.

“This could add up to significant savings ... which is important because of pharmacy cost inflation being so outrageously high,” said Dr. Sam Ho, chief medical officer for PacifiCare.

The program, dubbed Generic Advantage, seeks to offset aggressive promotion of expensive brand-name medicines, which drug marketers have supported heavily through advertising, distribution of free samples and even gifts of meals and sporting event tickets to physicians and their staffs. Studies have shown that doctors usually prescribe the medicines their patients request, such as those strongly promoted in magazines or on TV.

Uwe Reinhardt, a professor of health economics at Princeton University, called the initiative a positive move.

“I think ultimately it just has to go this way -- that patients get more engaged in thinking about drugs,” he said. “When you have these 15% premium increases that we’ve had, people cannot [handle it] year after year.”

Similar incentives have been offered by health plans in other states, including Michigan and Kansas, but none have been tried on this scale.

“This is an unprecedented, coordinated effort,” said Nancy Stalker, vice president of pharmacy services for Blue Shield of California. The four plans together account for about two-thirds of managed-care members in California.

The campaign’s main focus will be some 14,000 physicians statewide who write the majority of prescriptions for members of the plans. In mailings this week, they will be asked to discuss with patients the possible use of generic substitutes for about two dozen drugs used in treating six common medical conditions: arthritis pain, acid reflux, diabetes, depression, high blood pressure and high cholesterol.

The doctors also will get coupons to give patients who agree to try the generic equivalent of a listed drug. Coupons are good for a one-time discount of as much as $10 off the cost of the co-payment for the generic drug. In most cases, this will be a waiver of the co-payment, which typically costs $10 or less.

The actual savings will depend on the rules of the patient’s health plan.

If, for example, the co-payment for name-brand drugs is $20, and the co-payment for generics is $10, the patient who sticks with the generic drug will save $10 with every prescription refill. Those who have several prescriptions for a chronic condition could enjoy co-payment savings of hundreds of dollars a year, company executives said.

The campaign is expected to cost the health plans about $250,000 for mailings and an evaluation phase. Because the plans typically pay four or five times more for brand-name drugs than for generics, patients who collect the discount will represent a net savings to them, rather than a cost.

At Health Net, for example, generics currently make up about half of prescription drug usage but just 17% of prescription costs, said Bob Taketomo, the firm’s vice president of pharmacy services.

A 1% increase in generic usage would reduce Health Net’s drug costs by about $5 million, he said. At Blue Shield and PacifiCare, annual savings from a 1% increase in generic usage would be $6 million and $4.5 million, respectively, plan executives said.

Drug manufacturers are aware of the program but have not been heard from, the executives said. The industry “probably is not going to be thrilled, but there’s nothing they can do,” Stalker of Blue Shield said.

Nancy Pekarek, vice president of media relations for drug maker GlaxoSmithKline, said she had not seen the specifics and could not comment.

“There is a role for generic drugs,” Pekarek said, but there are “reasons why one product may work better than another for the patient.” She added that “the choice of which product works best” should be left to the patient and the physician.

Spokesmen for the Pharmaceutical Research and Manufacturers Assn., the industry trade group, could not be reached over the weekend.

Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, which has been a strong critic of health maintenance organizations, praised the campaign as a step in the right direction.

“I think it’s an interesting program because it is a way of trying to combat the influence of pharmaceutical marketers on doctors,” he said. “It’s what the HMO industry obviously feels is necessary to fight back.”

But Court also said the effect remains to be seen, adding: “You’re fighting literally billions of dollars in marketing with coupons.”