A Message from Kathleen Jaeger: Carve-outs Are Costly for States, Consumers

Pharmacy Times
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Pharmacists understand the value of generic medicines. They know that generics provide the same active ingredients and same results as branded drugs and can also save patients thousands of dollars each year. FDAapproved generics also are saving cash-strapped state governments billions of dollars each year. The FDA's assurance of safety and efficacy are why Americans have confidence in generics and why many state governments actively encourage their use.

Unfortunately, as more and more patients turn to generics to improve their lives for less, brand pharmaceutical companies are turning to tactics to try tow reverse this trend. They are working to pass legislation in more than 30 states to carve out whole categories of drugs - particularly, epilepsy and immunosuppressant medicines - by mandating that only branded medicines be dispensed in these categories even when lower-cost FDA-approved generics are available. Some proposals not only bar generic substitution, they also prohibit pharmacists from switching between generics made by different manufacturers. These carve-out policies hit patients and the entire health care system hard by driving up costs and reducing choice and access.

Contrary to the brand-company scare tactics, there is absolutely no reason to carve out whole categories of drugs that have been approved by the FDA. If the FDA approves a generic medicine, the agency is stating that the generic has the same health benefits as the brand. The treatment outcome for patients is the same whether they take the generic or the brand.

Carve-outs are also expensive propositions for states because higherpriced drugs may be prescribed even when more affordable, therapeutically equivalent generic versions would be equally effective treatments. For instance, if these bills were passed in New York, the state would spend $53 million more on drugs each year; Ohio would spend $42 million more; and Texas, nearly $33 million more each year.

In Florida, not long after the state implemented a preferred-drug list with a carve-out for mental health drugs, an analysis by state officials showed that the elimination of the carve-out could save the state ~$30 million a year. Less than 2 weeks after the study was completed, Florida followed through by passing legislation to eliminate carve-outs. Despite the savings, some Florida lawmakers have persisted in their efforts to carve out medicines - most recently, for immunosuppressant drugs. Fortunately for patients, Florida's governor vetoed the proposal in May of this year.

Other states that have rejected antigeneric substitution policies have achieved substantial savings without any impact on health outcomes. One year after the state of Kentucky changed its policy to treat an antipsychotic drug like all other medications for the purpose of substitution, "mental health advocates said they could trace no ill effects to the decision." In 2006, Tennessee recognized that a proposal to carve out epilepsy medications from generic-substitution rules would cost the state health care program, TennCare, in excess of $1 million each year. With these costs in mind, Tennessee lawmakers rejected the proposal.

Given the sound, scientific-based requirements of the FDA and the potential for enormous cost savings, there is no reason for states to restrict the use of generic medicines. As state lawmakers grapple with escalating health care costs, enacting carve-out legislation is a step in the wrong direction. Carve-out legislation takes a huge bite out of patient and state budgets and does nothing to improve quality of care.

Kathleen Jaeger, GPhA president and chief executive officer

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