/publications/gpr/2005/GPR_2005-12/GPR_2005-12_3283

Generic Utilization Leads Discussion

Author: Ioanna Tsakalakos

January 2006 will probably see the greatest change in health care delivery in 40 years—since the implementation of the Medicare program itself. The new Medicare Part D prescription drug benefit and improved access to health care services through Medicare introduce drastic changes to the system. These changes will necessitate prudent preparations by pharmaceutical companies, health care professionals, and Medicare and Medicaid beneficiaries.

The 6th Annual Generic Drugs Summit of the Institute for International Research provided a forum for all parties involved to educate themselves about the program and to discuss important issues involved with the program's implementation. During the Stakeholder Panel on the Issues Surrounding Generic Utilization—which was moderated by Fred M. Eckel, RPh, MS, editor- in-chief of Pharmacy Times—several important players offered their insight and expertise. The panelists included Todd Dankmyer, senior vice president for corporate and strategic initiatives for the National Community Pharmacists Association (NCPA); Ron E. Smith, PharmD, senior director of corporate pharmacy for Blue Cross and Blue Shield of North Carolina; and Michael Kopp, vice president of product ventures for Cardinal Health.

"Although we at NCPA were not fully satisfied with what ended up in the Medicare legislation," commented Dankmyer, "we've worked very hard with the chains and others to make Medicare an opportunity for retail pharmacy going forward."

Educating the stores about this very complex piece of legislation has proved to be a monumental task. To take advantage of the potential cost savings with generics in this program, many organizations, such as Blue Cross and Blue Shield of North Carolina, have had to disseminate information to patients regarding the costs of generic and brand medications.

"I think that future benefit designs will encourage firstdollar coverage of generic medications when the traditional standard benefit has a deductible or has some sort of true out-of-pocket cost before one is technically in benefit," said Dr. Smith. "I also believe that most plans will cover generic drugs for the ‘doughnut hole'period, thereby providing an all-encompassing benefit to encourage generic utilization."

To maximize the opportunity surrounding the Medicare Modernization Act (MMA), some organizations such as NCPA strategically decided to apply to become a prescription drug plan (PDP) under the MMA. In September, Community Care Rx (CCRx), the organization created by NCPA to serve as a PDP for Medicare beneficiaries, was approved as 1 of 10 national PDPs under Medicare. Provision of retrospective incentives to pharmacists who move the generic penetration rate in their stores will significantly drive generic utilization in Medicare. "Pharmacists today are risk managers, and all the Medicare PDPs are essentially in the risk management business," noted Dankmyer. "We must deliver the most cost-effective solutions."

One significant result from the efforts to create a dialogue among providers, physicians, and patients has been the waiving of copayments for generic medications. "Blue Cross and Blue Shield of North Carolina had a program in 2004 that waived generic copays for the fourth quarter," explained Dr. Smith. "We remarkably witnessed about a 22% conversion rate from brand name drugs to generic drug alternatives."

The benefits design issues are a major driver for enhancing generic utilization. The generic drug industry deserves a great deal of credit for better educating patients about the fairness, safety, and effectiveness of generic pharmaceuticals. It is much easier today for a pharmacist to substitute a generic for a brand if it is appropriate. "If a pharmacist calls a physician about a generic substitution, in 89% of the cases the physician will allow the substitution," said Kopp.

Another issue raised during the discussion involved the increasing concern about counterfeit and underqualified drugs that have seeped into the US pipeline from foreign and internal sources. The FDA is developing medication safety guidelines, including pedigrees and technology solutions such as radio frequency identification, bar codes, and improved packaging. Of course, these rules could adversely affect smaller companies that do not have the resources to comply with them.

The source of generic drugs (ie, where their active ingredients come from, or where they are manufactured) could influence purchasing decisions. Dankmyer explained that most independent pharmacists participate in one or more buying groups and are affiliated with primary and sometimes secondary wholesalers. Pharmacies rely on their wholesalers and their buying groups to make decisions regarding the credibility of the supply source. After that, they basically look for the best price.

The roundtable discussion eventually turned to the pharmacy reimbursement formula, which may change as part of Medicaid reform, or be changed by PDPs. Some of the changes would affect generic products and could market down the generic incentives, creating an incentive for pharmacists to use brand names because of the slightly larger margin.

The issue of the benchmark is critical. In the Medicaid budget, a 1% movement in generic distribution equals $475 million in savings to the Medicaid program. With incentives for pharmacists to enhance generic utilization, significant savings in Medicaid can be realized. "No independent pharmacy in the United States can buy at the average manufacturer price," said Dankmyer. "Of the $10 billion that are proposed as cuts during the next 5 years, $5.2 billion, or 52%, is supposed to come out of pharmacy, even though we represent approximately 2% of the Medicaid budget."

Raising another issue, Dr. Smith urged, "Health plans and consumers must proactively promote branded medications whose patents are beginning to expire. We must shift our paradigm and work with the branded manufacturers, especially during the last year before expiration. The market share usually begins to decline then. So, when the patent expires and we have an opportunity for the pharmacist to convert the patient to a generic equivalent, it is significant." Kopp further explained that firstyear generic prices are typically set as some ratio of what the brand price is at patent loss of exclusivity.

The moderator's final question dealt with medication therapy management (MTM), which has been made part of PDP requirements. If drugs were used appropriately and the misuse issues were reduced, a great deal of money could be saved. "The community pharmacist, who interfaces with the patient, can make a difference," said Eckel. "The MMA seems to give that opportunity at least to selected patients in the PDPs. How important is the role of the community pharmacist in dealing with this cost issue?"

The panelists agreed that MTM might be the most significant aspect of the MMA. NCPA has been trying to empower pharmacists to provide professional services. Most third-party plans today do not pay pharmacists for providing these services. "Pharmacists are extremely well-trained and accessible, but underutilized," argued Dankmyer. "For us, MTM is a huge opportunity." NCPA is currently building a separate fee-forservice model called Community MTM, which will be offered both within and outside of Medicare.

Overall, the roundtable discussion provided answers to critical questions. More issues were brought to light, however, as November 15 approached (ie, when enrollment for Medicare's prescription drug coverage began). In the meantime, there has been a mixed feeling of excitement and fear on the part of the American public, as one of the greatest events in federal history unfolds.

Ms. Tsakalakos is a freelance technical editor based in New Brunswick, NJ.