Going Generic: Insiders Discuss Generic Drug Legislation

Carolyn Heinze
Published Online: Friday, December 1, 2006

As the interest in generic drugs increases, both manufacturers and pharmacists face a number of issues related to government legislation and consumer education. This fall, at the 7th Annual Generic Drugs Summit, a panel of experts convened to discuss a number of matters concerning the generic drugs industry today. The panel was moderated by Pharmacy Times Editor-in-Chief Fred M. Eckel, RPh, MS, professor and director of the Office of Practice Development and Education at the School of Pharmacy, University of North Carolina at Chapel Hill.

At present, generics represent 56% of the total prescriptions dispensed in the United States. In an effort to decrease health care costs, pharmaceutical professionals are striving to augment generic drug usage into the 60% to 70% range. Ted Lingerfeldt, director of pharmacy procurement at Kerr Drug Inc, noted that his organization has succeeded in achieving 60% utilization.

The education of pharmacists and, ultimately, patients, is crucial in promoting the use of generic drugs, according to Lingerfeldt. "You have to have a very strong education and effort within your stores so that pharmacists can educate the consumer and the other health professionals involved in patient care as to the value of generics and as to exactly their safety and their efficacy so the physician can feel totally comfortable in prescribing or allowing the substitution."

"Once our educational plan was implemented, we reinforced generic utilization through the technology incorporated in our pharmacy dispensing system," said Lingerfeldt. "These efforts enabled Kerr to be well-positioned to maximize generic utilization with the implementation of Part D under MMA [Medicare Modernization Act]. The resulting increase in utilization and efficiency benefits all our patients."

Technological advances, such as messaging before and after dispensation, serve to facilitate the sale of generic drugs. "[There are] incentives for pharmacists to dispense generics and make it easier for them to dispense generics through technology," said Edith Rosato, RPh, senior vice president of pharmacy affairs for the National Association of Chain Drug Stores (NACDS). Over the next several years, $60 billion worth of drugs will be coming off patent—paving the way for generic drugs to play an even larger role.

Rosato added that, with the incorporation of 3-, 4-, 5-, and 6-tier copays, patients are growing less reluctant to purchase generic drugs over branded ones. "It is a lot easier for a pharmacist to have a discussion with the patient when [he or she] can say, ‘We can use a generic and just pay $2, versus 20% of the cost of the drug if you are on tier 5 or 6.'"

Pricing Problems

A primary issue, however, is the effect that maximum allowable cost pricing and potential average manufacturer price initiatives may have on the dispensing of generic drugs in the near future. For many pharmacists, it could make more sense to promote brand name products.

"I think it is something we should be very concerned about," said Phil Burgess, RPh, national director of pharmacy affairs at Walgreens. "Certainly all of us know the value that generics bring to providing cost-effective health care. We at Walgreens do everything possible to promote generics and have partnered very well with the generic industry in order to promote generics."

At the same time, it is dollars you take to the bank—not percentages, Burgess pointed out. "Sometimes people look at generic pharmaceuticals, and they look at it purely based upon a percent profit, as compared with dollars of profit. And as we look to these models that are being put forth with regards to the various cost controls that are being recommended, if in fact the dollars of profit are drained out of the ability to dispense generics, then it becomes more profitable to dispense a branded product than a generic. Then that's going to cause some significant negative impacts on the dispensing of generic pharmaceuticals."

Authorized Generics?Friend or Foe?

Authorized generics—drugs approved under a new drug application (NDA) for the innovator marketed and distributed under a generic label by a generic company—allow branded companies to maintain some revenue stream that would otherwise be lost as a result of competition from the generic sector. "Branded pharmaceutical companies continue to look at authorized generic opportunities as part of life-cycle management," said Steve Goodman, RPh, vice president of marketing for generics at Watson Pharma Inc.

"Because of the recent decline in bringing new innovative products to market, branded pharmaceutical companies look for ways to hold onto revenue streams for their NDA products as generic competition gets closer," Goodman explained. "Authorized generic agreements have proven successful and as such are likely to continue into the future."

This trend has caused some controversy. William Kennally, president of Greenstone Ltd, a wholly owned subsidiary of Pfizer Inc, played it down, arguing that increased competition in the generic arena will result in lower costs. "There is a lot of credible evidence that demonstrates the value authorized generics bring to the marketplace," he said. "Authorized generics increase generic access for patients. In addition, authorized generics increase competition, which results in lower pricing, so patients, customers, and payers are all paying less as a result of our market entry."

Kennally agreed that research-based pharmaceutical companies like Pfizer should be interested in ensuring a strong generic market. While Pfizer has Greenstone to market authorized generics, "most brand companies have key products that are represented by an authorized generic once competition occurs in the marketplace. There's a lot of value for the brand company," he said. "The dynamics of how the generic market works provides strategic value that helps brand companies understand the impact of the generic market on brand products," he added.

Kennally continued, "There's a lot of evidence out there right now that most brand companies are very interested in the strength of the generic marketplace." As an authorized generic company, he added, Greenstone believes in working together with retail pharmacy in order to help educate pharmacists in terms of generic availability to increase the generic prescription rate.

"I think one of the values that companies like Greenstone provide is that you know our product is the same size, shape, and color as the branded product," said Kennally. Therefore, "Greenstone and other authorized generics in the marketplace allow the pharmacist to confer with patients, consult with them, and make the transition from the branded product to the generic easier."

Playing a New Role

Under the MMA, medication therapy management has pharmacists enthusiastic about the evolution of their trade.They are no longer mere dispensers of drugs, but an increasing source of information for their clients. "[It increases] the role pharmacists can play in helping patients manage their therapy," Burgess said.

"As pharmacists?we are moving away from the whole concept of being dispensers of drugs—putting pills in bottles—to being a dispenser of information," he added. "What that is going to lead to will be in fact these interactions, communications with physicians. This has huge implications for the generic industry."

Pills via Post

Mandatory mailing of refill medications also is reshaping how drugs are administered and is producing mixed feelings within the industry. "Anytime you have nontraditional folks making health care decisions, there is reason to be concerned [about] that," said Kennally.

"Mandatory mail is one potential strategy that is intended to try to lower health care costs," he continued. "However, there is conflict on whether that is cost-effective. IMS [Health] has stated that the mail growth has slowed over previous growth levels, and the NCPA [National Community Pharmacists Association] recently commented that the overall value that patients get from going to the community pharmacist may be enhanced over mail.You've got different sets of opinions on whether mandatory mail is going to be a successful long-term strategy."

Retailers are devising their own tactics to address this problem. Walgreens, for example, offers a program whereby patients can obtain a 90-day refill at the retail level—similar to what can be procured via mail order—enabling patients to enjoy face-to-face contact with their pharmacist if they so desire.

"We believe that mail service should be an option," Burgess said, noting that Walgreens currently operates 3 mailorder houses.

"There are people that do view mail service as increased convenience," he said. "We think it should be an option that is available to people to be able to get their prescriptions through the mail if in fact they want to. We, however, are opposed to mandatory mail programs where people are forced into mandatory mail or that they have no offer to be able to get their prescriptions in the retail community pharmacy."

Ms. Heinze is a freelance writer based in Vancouver, British Columbia.




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