Healthcare Reform and Generic Drugs will Drive Branded Prescription Drug Prices Higher
Recently, in one month, the price of my branded prescription drug for high cholesterol went from $130 per month to $145 per month at the same pharmacy. Yesterday I changed to a generic drug alternative (not the same as the brand I was taking) which will cost me $4 per month after joining a $20 per year prescription savings club. I now get more than two years of medication for the price I was paying for one month of the branded product. Assuming I will be able to control my cholesterol with this new medication (no reason to believe it won’t as I have taken most of them over the past several years), at $1 per week it is hard to complain about the high price of prescription drugs.
So why was I even paying $130 in the first place, when generic alternatives were available? Well, when I had prescription drug coverage through my employer provided insurance, my co-pay for the branded products was about $20. I not only didn’t think about the actual price of the drug but I didn’t even care to know what it would have cost without insurance. Generic drug alternatives didn’t enter the thought process. Besides, how much lower priced could the generic drug be? More recently, until the price increase, I just kept getting the prescription filled even though it seemed expensive at $130 per month.
Fortunately my physician agreed to try me on the generic alternative. For once I also felt fortunate that I was not covered by a government program (e.g., Medicare, Medicaid, and TRICARE) which would have made me ineligible for this savings club and these generic drug prices. There is a wide range of therapeutic categories with over 400 generic medications available from this pharmacy prescription savings club priced at $12 for a 90-day supply (or $9.99 for 30 days). Again, hard to suggest these prices are unreasonable and they certainly are not expensive in the context of most prescription drug price discussions. Even without the savings club membership the price would have been less than $30 per month.
Despite the fact that over 70% of prescriptions in the US are now filled with generics drugs, I can’t help but to think from my own experience that there are still a lot of people who could financially benefit from a switch to generics. I also believe healthcare reform will bring significant cost pressures to get more patients converted to generic drugs. The Congressional Budget Office reported that in 2007, if all of the 45 million Medicare Part D prescriptions filled with multiple-source brand-name drugs (brand name drugs with generic alternatives) had instead been filled with their generic counterparts, an additional $900 million would have been saved. And that is without considering therapeutic substitutions (as my case would be considered) or the potential savings from the blockbusters now coming off patent over the next few years.
The biggest downside for patients resulting from this healthcare market evolution to encouraging the use of more generic drugs is that if you need one of the innovative branded products for which there is no good generic alternative, you are going to pay much higher prices than you might have in the past. If my generic cholesterol lowering agent isn’t as effective (or has more side effects) as the branded product I was taking, I’ll be back to paying the $140 per month.
I believe two factors will drive branded product prices higher with healthcare reform. First, truly innovative treatments that deliver real clinical value and unique therapeutic benefits will command a premium price because they will be deemed worth paying for and taking. Second, more generic drugs and more patients taking generic drugs will shrink the market for branded products to people who absolutely need the branded products. Drug companies will have to exact their profits from fewer products that can deliver these unique therapeutic benefits to much smaller patient populations. Companion diagnostics will further reduce these already small populations of patients, by identifying responders and eliminating those who might experience side effects.
So the good news for patients is there will be more generic drugs available at low prices resulting in lower costs to government programs (tax payer benefit), private insurance (keeps co-pays lower), and patients. Pharma companies on the other hand will be able to, and will have to, charge even higher prices when patients need their innovative branded products.
Disclosure: I am not compensated by the prescription savings club. The link is included here only as a reference.