FEBRUARY 01, 2006
Barbara Sax

The cost of prescription medicines will continue to be a concern when it comes to the Medicare Modernization Act (MMA). Experts say that value is also becoming an important concept, however, and that, ultimately cost may not be as important as the value of health and disease containment.

"Treatment decisions will increasingly be based on information on the trade-off between the clinical benefits and the financial costs associated with available products and services,"said Carolyn Buck Luce, senior partner in Ernst & Young's global accounts group.

Luce said that, under the MMA, the Centers for Medicare & Medicaid is conducting demonstration projects to evaluate the cost of drugs, their effectiveness, and their value for government reimbursement. "Medicare is also providing financial incentives to beneficiaries that may influence their value-based decision. For example, low-income individuals will pay $2 for generics, versus $5 for brands,"she said.

The MMA landscape is looking good for generics. Israel Makov, president and chief executive officer of Teva Pharmaceutical Industries Ltd, believes the level of penetration of generics will increase as the MMA takes hold. "The MMA supports the uptake of generics, which currently account for about 50% of the prescriptions dispensed in the United States,"he said. "I think this level of penetration is going to increase, because otherwise the government cannot control the cost of health care for the growing Medicare population."

Luce said that, while it was hard to tell whether the growth in generic drug sales was due to increased consumer demand or the changing dynamics in the health insurance and pharmacy benefit management arenas, the use of generics in the United States exceeds that of most other developed countries, and the government is taking additional steps to make generics more widely available through Medicaid and recent Medicare reforms.

That does not mean that generic manufacturers are not subject to the increased public scrutiny that has been aimed at branded pharmaceutical products. As the FDA's Janet Woodcock explains in an interview with Ernst & Young in the Progressions 2005 report, "public opinion about drug safety is variable: one minute the public is asking the FDA to speed up its review, the next minute they are criticizing the agency for not spending enough time determining the safety profile of a drug. It doesn't appear as if the public has made a distinction between brand versus generic safety as a result of recent safety events or related press coverage."

Luce said the public has moved from a "trust me" environment to a "prove it"environment when it comes to prescription drugs. That attitude is having a big impact on how treatment decisions are being made.

"The increasing application of evidence-based medicine (EBM) in the United States and other countries is also impacting consumers' perception of value,"said Luce. "While there are many different perspectives on EBM, the practice is resulting in greater dialogue among payers, physicians, and patients about the value of one treatment over another."

Ms. Sax is a freelance writer based in Chevy Chase, Md.

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