Anthony Palmieri, RPh, MBA

Since 2008, there have been significant changes in our country that impact generic prescription drug utilization. We have experienced the worst recession since the Great Depression, with a marked contraction in the economy, a decline in consumer spending, and a dramatic increase in unemployment.

 Surveys show that many Americans—with and without health insurance&mdash;have cut back on needed medical care, which has led to an increase in prescription abandonment and nonadherence.

 In addition, there has been a proliferation of consumer-marketed, retail-based discount generic drug programs, which provide access to a wide range of generic drugs at a nominal cost (eg, a 90-day supply for $10). As a result of these circumstances, there has been a substantial increase in the proportion of consumers who choose a generic equivalent ver its brand-name prescription drug counterpart.

Generic drug costs continue to fall in advance of a significant “patent cliff” in 2011-2012 during which time a number of blockbuster brand drugs are expected to lose marketing exclusivity and face generic competition for the first time. Some of these will enter the market earlier than expected (as with generic versions of the oral contraceptive Yaz and the ulcer drug Prevacid), while others will be delayed by patent settlements between brand and generic drug manufacturers. Also, an increasing number of brand drugs are being introduced into highly specialized generic therapeutic classes (eg, the gout and oral anticoagulant markets) as result of regulatory initiatives or to satisfy unmet safety and therapeutic needs. In addition, in the next 3 years major brand pipeline releases are pending in growing therapeutic classes such as oncology, multiple sclerosis, HIV, and rheumatoid arthritis. All these factors impacted the overall generic dispensing rate (GDR) in 2010 and set the pace for 2011 and 2012.

Drug mix refers to evaluation of the impact of new products and changes in the balance between generics and brands, as well as between more expensive and less expensive drugs in a category. Branded pharmaceutical blockbusters becoming available as generics and the subsequent change in the GDR are major factors in the drug mix. Over the last several years, a large number of blockbuster brand drugs have become available as generics, which has affected the overall GDR (

Drug mix (ie, the volume of generic vs brand drugs or specialty vs non-specialty drugs) can have a material impact on trend. Drug mix factors include introduction of generic alternatives in top categories and new specialty drugs on the market. Drug mix varies by market segment and age. The ratio of significant new brands to new generics has fallen dramatically in recent years. While there have been very few new blockbuster drug approvals, an increasing number of billion-dollar selling drugs have lost patent protection and have seen generic competition as a result. Fewer new expensive (brand) drugs—coupled with an increasing number of cheaper (generic) drugs, which drives an increase in the GDR&mdash;have contributed to a slowing of drug trend.

The speed at which a new generic is adopted by payers and consumers, as well as the degree of price erosion that may be expected, has much to do with whether the first approved generic for a given brand is granted a 180-day period of marketing exclusivity.

A study by the US Food and Drug Administration (FDA) found that when only 1 generic was marketed, its price was only just slightly lower (approximately 6% less) than the comparable brand-name drug. However, 2 competing generics were found to drive the cost down by nearly half, with the average discount growing to nearly 80% less than the brand when 9 generic firms were competing with one another, as shown in

The incremental increase in GDR is directly tied to the sales volume of the brand it replaces; a widely used brand drug losing patent protection will have a much greater impact on the GDR than one that is used in a smaller treatment population. While there were several notable new generics in 2009, there were not as many as were seen in 2007, or as many as are anticipated in  2011-2012. Generic drug use continues to increase in commercial business.

The analysis is a retrospective study of CVS Caremark members. The CVS Caremark de-identified database was used to study the utilization of generic drugs from January 1, 2008, through September 30, 2010. The study population was a representative sample of members across a variety of plan sponsors including health plans, managed care organizations, Medicaid, unions, national and local employers, and government agencies located throughout the United States.

Gross cost included discounts, member contributions, and plan sponsor contributions. The manufacturer rebates were excluded. Gross cost per day was determined by the total gross cost divided by the total days of supply for the time frame. The gross per member per month cost was determined by the total gross spending divided by the total member months of eligible plan participants (members). Utilization trend was based on days of supply, and generic utilization was based on number of  unadjusted prescriptions per member per month.

HMG-CoA reductase inhibitors (statins) represented 6.4% of total gross cost in our year-to-date (YTD) September 2010 non-Medicare Book of Business (BOB), with a 4.6% gross trend and a 6.7% utilization trend. The class all-business GDR was 59.0% in September 2010 compared with 55.7% in September 2009. Zocor (simvastatin) generics, which launched in June 2006, held a 42.4% share of claims in September 2010; Pravachol generics, which launched in April 2006, held a 10.5% share.

 An older generic, lovastatin (sold under the trade name Mevacor), held a 6.1% share of claims. The dominant brandname drug, Lipitor, held a 26.8% share of statin claims, with a gross cost per day of $3.56 compared with $0.57 for generic Zocor and with $0.55 for generic Pravachol. Generic statins are expected to dominate the class with the launch of generic versions of Pfizer’s Lipitor (atorvastatin) in November 2011. Pfizer was able to maintain its exclusivity for branded Lipitor for 20 months beyond the expiration of its basic compound patent, which expired in March 2010, as a result of a patent settlement with generic manufacturer Ranbaxy.

As studies have shown, there is a correlation between elevated low-density lipoprotein cholesterol and risk of cardiovascular complications. While statins are commonly used to reduce low-density lipoprotein cholesterol levels, their ability to reduce cardiovascular risks may also be due to reducing C-reactive protein levels in the body, which are generally representative of the  extent of tissue damage and inflammation occurring in an individual. Because this risk is considered independent of a patient’s cholesterol level, statins could be utilized in a subset of the population who have cholesterol levels within normal ranges of medical acceptance. Based on phase III study results, AstraZeneca’s Crestor (rosuvastatin) has been approved by the FDA for  use in patients without clinically evident coronary heart disease to reduce the risk of myocardial infarction, stroke, and arterial revascularization in men aged ≥50 years and women aged ≥60 years with a C-reactive protein level of ≥2 mg/L and at least 1 additional cardiovascular disease risk factor.

While there is some evidence that both Lipitor and simvastatin also reduce C-reactive protein levels, Crestor is the only product that carries the FDA indication, which could represent a competitive advantage over other products in the class.

Proton pump inhibitors (PPIs) represented 5.7% of total gross cost in our non-Medicare BOB in the YTD September 2010 period. While the class utilization trend was relatively flat (−0.2%), continued growth in generic PPI market share continues to push the gross trend downward (−14.4%). The PPI all-business GDR had a 16.6% YOY increase, from 49.2% in September 2009 to 65.8% in September 2010, as a result of generic Prevacid’s (lansoprazole) launch in November 2009. An over-the-counter (OTC) version of Prevacid (Prevacid 24HR) launched concurrently in November; while it is difficult to quantify the extent to which this has affectedsales of the prescription-only PPIs, OTC availability is historically a growth moderator.

As of September 2010, branded Nexium (esomeprazole), a follow-on molecule to Prilosec (omeprazole), held a 20.9% share of claims with a gross cost per day of $5.42. Generic PPIs combined to hold a 65.6% share of the class; generic Prilosec held a  42.1% share, compared with a 13.8% share for generic Protonix (pantoprazole), and 9.7% for generic Prevacid.

The launch of Protonix generics illustrates how convoluted and precarious the process of generic drug commercialization can be. Teva Pharmaceutical launched an at-risk pantoprazole generic in late December 2007. The company then agreed to a standstill period during which negotiations for a patent settlement with brand manufacturer Wyeth would proceed and no additional generic product would be shipped. This agreement was terminated at the end of January; however, Wyeth announced that it had been unable to reach a settlement and said that it would launch an authorized pantoprazole generic.

 Teva subsequently said that it did not expect to ship additional generic pantoprazole and gave no indication as to when it expected to resume distribution. It has been unclear how much of Teva’s pantoprazole entered the market. Sun Pharmaceuticals, which shared exclusivity with Teva on the 40-mg strength, announced on January 30, 2008, that it too had launched a pantoprazole generic.

Teva and Sun may have to pay a significant price for their at-risk generic launches. On April 23, 2010, a jury in a patent infringement case rejected Teva and Sun’s claims that the Protonix patent was invalid based on obviousness or double-patenting. Pfizer, which gained the rights to Protonix through its acquisition of Wyeth, could seek damages from the companies in excess of $2 billion. The basic patent on Protonix, including the 6-month pediatric exclusivity period, expired in January 2011. It has been suggested that Pfizer could reestablish control of the market through a preliminary injunction or settlement with Teva and Sun,

 but there has been no indication of this thus far.

A major impact on the slowing down of the GDR came from the sympathomimetics, for which the class all-business GDR stood at 13.8% in September 2010 compared with 29.6% in September 2008 when the generic inhalers were still available. Prior to January 2009, there were numerous generic albuterol metered dose inhalers (MDIs) used by asthmatics as short-acting or “rescue” inhalers. These used chlorofluorocarbons (CFCs) as a propellant. Although use of CFC propellants was generally banned in consumer aerosols in 1978, the Clean Air Act allowed certain “essential uses” to continue. However, in May 2008, the  FDA announced that production and sale of single ingredient albuterol CFC MDIs must stop by December 31, 2008, in favor of a newer and safer (for the environment) alternative propellant, hydroflouroalkane (HFA), which became the required standard for all inhalers starting in 2009.

 The net result of this change was to drive all of the older CFC generic albuterol inhalers off the market, to be replaced by newer, brand-name inhalers using the HFA propellant. This in turn has had the effect of driving the class GDR downward.

Inhaled medications for asthma and chronic obstructive pulmonary disease generate billions of dollars in sales. However, higher barriers to entry for generic drug makers (like complex drug delivery technology and challenging regulatory requirements) will keep a lot of players out of these markets, which in turn limits price erosion and raises profit margins. The FDA hasn’t established bioequivalence standards for generic inhaled respiratory drugs, which means the cheaper, straightforward Abbreviated New Drug Application process used for oral small molecule generics isn’t available to inhaled drugs. Regulatory hurdles aside, if and when generics do reach the market, other challenges remain. Convincing patients and physicians to switch from a brand drug they are comfortable using or prescribing to a generic that doesn’t have the same inhalation device is likely to be a challenge. Drugs and devices are patent protected separately, and although a patent expires on a drug, the patent protection covering a device could extend further.

GlaxoSmithKline’s Advair (salmeterol/fluticasone) represents by far the biggest opportunity for generic drug manufacturers, with the primary patent for the drug component, fluticasone/salmeterol, having expired in September 2010. Patents for the device extend further, however, out to 2016 for the popular Diskus dry powder inhaler and to 2018 for the metered-dose inhaler.

Because the regulatory hurdles for approval are so high, Teva said recently (November 2010) that it isn’t attempting to develop a  substitutable version of Advair. Instead, it’s focusing on developing an Advair-like inhalable drug combination that Teva would sell under a different brand name (and presumably at a lower price). Teva is hoping that insurers will push their patients to switch to such a product, even if it isn’t an exact copy of Advair.

Insulins represented 2.7% of the total gross cost in our non-Medicare BOB for the YTD period through September 2010, with a 16.9% gross trend and a 5.3% utilization trend. Insulins have no generic alternatives available and none are anticipated in 2011.

There are no generic insulins because insulin is very different from other heavily utilized nonspecialty classes. Insulin became the first pharmaceutical biologic in 1978, when researchers at Genentech manipulated bacteria into making human insulin. The market has ever after been one of newer, more advanced, costly patent-protected branded products, replacing what came before. There are no generics because no process currently exists for approval of a biogeneric.

Many branded insulins are due to lose patent protection in 2015. However, unlike many other therapeutic proteins, insulin is required in very high volumes. The substantial manufacturing scale required to be competitive in the insulin market has already  deterred 1 potential biosimilar contender, Novartis’s Sandoz unit, which has said it is no longer developing biosimilar insulin, citing already-competitive pricing, low margins, and large sales force requirements as other factors behind the decision. Proprietary delivery technology used by brand manufacturers, such as prefilled pens, which could preclude the possibility of  autosubstitution, is another potential barrier to entry for generic manufacturers.

Antihypertensive combinations represented 2.6% of the total gross cost in the YTD September 2010 non-Medicare BOB. The class had a gross trend of 2.7% and a utilization trend of 1.4%. The class had an all-business GDR of 57.2% in September 2010, up from 50.4% in March and from 49.7% in September 2009. Driving the GDR increase is the growing share of Hyzaar (losartan hydrochlorothiazide) generics, launched in early April, representing the first launch of a generic angiotensin II receptor antagonist molecule.

 The effect of the generic Hyzaar launch is less keenly felt in this class because it includes combinations of multiple antihypertensive classes; it has been dominated for years by generic lisinopril hydrochlorothiazide, which held a 25.5% share of claims in September, with a gross cost of just $0.25. The angiotensin II receptor antagonist class, which saw generic competition for the first time with the simultaneous launch of generic Cozaar (losartan), had a GDR of 20.9% in September on the strength of that single generic product.

The miscellaneous anticonvulsant class saw its GDR jump from 47.7% in July 2008 to 80.3% in September 2010. This is the result of multiple competing generic versions of Topamax (topiramate), Keppra (levetiracetam), and Lamictal (lamotrigine) entering the market. Generic Lamictal was first launched by Teva Pharmaceuticals in July 2008, for which it had marketing exclusivity through January 2009.

 Mylan launched its generic Keppra in November 2008, followed by the entry of multiple competing Keppra generics in January 2009,

which sent the cost of that molecule plummeting. Finally, the FDA approved multiple Topamax generics at the end of March 2009,

which captured market share very quickly. Annual sales of Topamax were approximately $2.4 billion in the United States for the 12 months that ended December 30, 2008, based on IMS sales data.

  Overall, as a result of these generic entries, the class average gross cost per day fell from $4.56 in July 2008 to $2.66 in September 2010.

The selective serotonin reuptake inhibitor (SSRI) class of antidepressants represented 2.0% of total gross cost in our non-Medicare BOB for the YTD through September 2010, with a −3.8% gross trend and a 3.1% utilization trend. The SSRI all-business GDR stood at 77.0% in May, and the class is dominated by generic versions of Zocor (sertraline), Celexa (citalopram), Prozac (fluoxetine), and Paxil (paroxetine). The serotonin-norepinephrine reuptake inhibitor (SNRI) antidepressants, conversely, had a 37.3% GDR in September, a 30.2% YOY increase. Effexor XR generics, which launched on July 1, 2010, had captured a 26.1% share of claims as of September; however, the SNRI class leader is Eli Lilly’s Cymbalta (duloxetine), with a 43.7% share. Cymbalta has benefited from being approved for indications beyond depression that expand its use to other patient populations. It is also approved for generalized anxiety disorder, diabetic peripheral neuropathic pain, fibromyalgia, and, most recently (November 2010), for the management of chronic musculoskeletal pain (chronic low back pain and chronic pain due to osteoarthritis, specifically). The latest approval may expand Cymbalta’s use even further and could have a negative impact on  SNRI generic utilization in general. Even though a high percentage of Cymbalta claims are already for unlabeled uses, this new indication will very likely broaden the utilization, potentially taking claims from less-expensive generic and OTC non-steroidal  anti-inflammatory drug options that are currently used to manage musculoskeletal pain today.

In addition to copay and plan design options that provide financial incentives for members to select a generic, there are marketplace considerations. Several factors impact GDRs, such as OTC drug launches, regulatory initiatives, FDA approval processes, and new brand formulations.

Over-the-counter drug launches also impact generic utilization. Novartis launched OTC Prevacid 24HR (lansoprazole 15 mg) on November 12, 2009, with a 3-year market exclusivity award. Prevacid 24HR is available in a 14-count package for a suggested retail price of $11.99, about $1 more than Prilosec OTC.23 The measure of its success and impact on the PPI class continues. At a minimum, OTC switches historically have demonstrated the potential to capture a certain amount of share from both brand and  generic products while exerting a certain amount of pricing pressure on the class. In the most dramatic instances, these switches can trigger a collapse of the prescription market in which they formerly competed. Depending on the therapeutic class,  prescription utilization is also a determining factor in how commercially successful a prescription-to-OTC switch can be. Survey data have shown that about 40% of consumers choose an OTC drug as their first course of action when treating either allergies or heartburn.

For historical reasons, some drugs available in the United States lack required FDA approval for marketing. Since the FDA launched a new drug safety initiative in 2006 to remove unapproved drugs from the market, it has ordered more than 500 unapproved drugs to be removed from the market, which has impacted 275 firms. Since then 70 products have received FDA approval. In 2009, the agency sent 13 warning letters to firms that marketed unapproved drugs and took action on 4 classes of unapproved drugs, including codeine sulfate tablets and narcotics containing morphine sulfate, hydromorphone, or oxycodone.

An unforeseen consequence of the FDA’s enforcement of the Unapproved Drugs Initiative in some cases has been to limit competition and drive costs up by driving older, low-cost generic drugs in the affected classes out of the market, to be replaced by newly approved products that are much more expensive.

By way of an example, colchicine, a common centuries-old drug used to treat gout pain, cost just pennies a tablet until last year. In July 2009, the FDA approved URL Pharma’s version of the drug, which the company subsequently launched under the brand name Colcrys, with a 180-day period of marketing exclusivity award. URL Pharma began suing longtime manufacturers of unapproved colchicine, saying the companies were now illegally marketing their products. Some companies chose to fight the lawsuits, while others ceased production; retail prices for the drug skyrocketed.

 In September 2010, the FDA ordered a halt to the marketing of unapproved single-ingredient oral colchicine, leaving Colcrys as the only such product on the market,

with a cost in excess of $5.00 per tablet.

 In another example of how the FDA’s Unapproved Drugs Initiative has affected the market, the FDA approved Roxane Labs’ morphine sulfate oral solution in January 2010 for the relief of moderate to severe acute and chronic pain in opioid-tolerant patients at concentrations of 100 mg/5 mL or 20 mg/1 mL. The approval makes it the only FDA-approved morphine sulfate oral solution available at this concentration; the FDA will now require the 7 manufacturers and distributors of highconcentration oral morphine sulfate, none of which are approved, to submit a New Drug Application or withdraw their products from the market.

 Pancreatic enzyme products treat maldigestion, malabsorption, and malnutrition caused by exocrine pancreatic insufficiency, which affects the majority of cystic fibrosis patients. The condition is also common in patients with chronic pancreatitis, pancreatic tumors, pancreatectomy, and diabetes. Pancreatic enzyme products were introduced prior to the current FDA approval process mandated by the Food, Drug, and Cosmetic Act of 1938 and have been manufactured and sold  outside the agency’s regulatory umbrella as a result. Because of quality and safety concerns, the FDA called for better control of these products and drafted new quality standards in 2004. All manufacturers of exocrine pancreatic insufficiency products (there were from 30 to 40 at the time) were required to obtain agency approval via the New Drug Application process by April 2010 or  withdraw from the market.

As a result of the FDA’s Unapproved Drugs Initiative, there are only 3 currently marketed exocrine pancreatic insufficiency drugs, all of which are branded therapies—Abbott Laboratories’ Creon (pancrelipase), Eurand Pharmaceuticals’ Zenpep (pancrelipase),  and Johnson & Johnson’s Pancreaze (pancrelipase)&mdash;which cost considerably more than the generic drugs that previously dominated the market.

While these products must compete on price in addition to efficacy and tolerability, and a fourth product—Lilly’s Solpura (liprotamase)&mdash;may enter the market in 2011,

 the cost of these drugs is unlikely to fall substantially until generic competition is once again introduced.

Up until 2009, no new drug had been approved for gout (a disease that affects some 5 million Americans) in 40 years. During that period, the generic drug allopurinol was the undisputed standard of care. Then, in February 2009, the FDA approved Takeda’s Uloric (febuxostat) for the chronic management of hyperuricemia in patients with gout,

 followed by the approval in September 2010 of Savient Pharmaceuticals’ Krystexxa (pegloticase) for treatment of chronic gout in adult patients refractory to conventional therapy. As the first biologic drug approved for gout, albeit for a limited population, Krystexxa pricing is expected to run into the thousands of dollars per patient per year.

Boehringer Ingelheim’s Pradaxa (dabigatran) capsules were approved by the FDA on October 19, 2010, for prevention of stroke and systemic embolism in patients with atrial fibrillation,

 making Pradaxa the first oral anticoagulant to enter the market since Coumadin (warfarin) was approved in the 1950s. Generic warfarin, in turn, has been available since 1997. The shift from genericwarfarin to branded Pradaxa is expected to impact both the GDR and cost in the anticoagulant class. An estimated 2.3 million Americans live with atrial fibrillation, a number that is expected to increase with the aging population to 5.6 million by 2050. The condition is associated with up to 15% of all strokes, and those strokes are about twice as likely to be fatal or severely  disabling as strokes from other causes.

Warfarin, the current standard of care, has demonstrated wide variability in effectiveness at a patient level, and has many drug-drug interactions in addition to a significant bleeding risk.

 Given the bleeding risks with warfarin, only about half of atrial fibrillation patients are actually taking the drug, while another 30% are eligible to take warfarin but do not.

 Treatment with Pradaxa does not require blood monitoring or related dose adjustments and has no recommended dietary restrictions.

However, the need to take 2 tablets daily (instead of once daily for warfarin) and the lack of regular follow-up for lab testingmay  result in a compliance challenge for patients taking Pradaxa.

Pradaxa’s competitive advantage relates to its superior efficacy rather than to increased safety; patients taking higher-dose Pradaxa in the pivotal trial that led to its approval had the same bleeding risk as with warfarin, but they had 34% fewer strokes and systemic embolisms.

 Generic warfarin’s gross cost is a fraction of Pradaxa’s; however, the direct cost of warfarin does not include the expense of the regular blood monitoring required, which can range up to $1065 per year for primary care settings and up to $1747 per year for patient self-monitoring tests.

There is another oral anticoagulant that could reach the market in the near term, Johnson & Johnson/Bayer’s once-daily Xarelto (rivaroxaban).38 Pradaxa has the potential to generate between $2 billion and $6 billion in sales, according to analyst predictions.

In April 2010, the FDA approved a new version of Purdue Pharma’s OxyContin (oxycodone HCL), formulated to reduce abuse. Because OxyContin is a controlled-release product, each tablet contains a large amount of active ingredient that could be released all at once upon breaking, chewing, crushing, or dissolving the tablets for injection; this results in a faster onset of action compared with swallowing the tablet whole, and created a substantial black market of sorts for the nonmedical use of the drug. The new formulation discourages misuse of the medication by making the product more tamperresistant, while maintaining bioequivalence to the older version.

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By 2012, we estimate that more than 3 of every 4 prescriptions will be filled with a generic drug.