According to pharmacy benefit manager Express Scripts, increased usage of generic drugs helped slow growth in prescription drug costs for 2007, resulting in an estimated $5.2 billion in savings for benefit plan sponsors and their employees. In 2007, total spending on prescription drugs grew 4.7%, the slowest rate-of-growth ever reported by the company.
Data shows that average prescription costs increased just $1.09 to $54.34 in 2007, up from $53.25 in 2006. Factors contributing to higher costs included a 2.5% increase in overall utilization and 7.4% increase in average brand name drug prices, while average generic drug prices decreased 3.1%. Without the so called “generic effect,” the cost per prescription would have increased $3.58 to $56.83.
Generic purchasing power wielded its biggest impact on cholesterol drugs, the nation’s most-prescribed drug category. Both Pravachol(R) and Zocor(R) went generic in 2006, causing a significant shift in generic utilization of these drugs. Costs for cholesterol drugs overall fell 15.5% in 2007, averaging $67.32 per prescription versus $79.48 in 2006. Express Scripts reported that 48.9% of all prescriptions in 2007 for a cholesterol drug were for a generic, while 63.7% of all prescriptions filled were for a generic.
On a per-member-per-year basis, spending in 2007 increased from $762.76 to $798.76, including both plan costs and member co-payments. Had generic utilization remained constant, spending would have been $32.53 higher for each of the nation’s 158.5 million commercially insured employees.
To determine drug trend, Express Scripts includes both member co-payments and plan sponsor costs to calculate total cost. The company also accounts for changes in utilization, the relative rates at which brands and generics are used, price inflation, units per prescription and changes in the mix of chemical entities and dosage forms used.
Research such as this clearly shows the cost savings potential that generic drugs can offer to an employer’s health plan. Co-payment differentials that make generics significantly more cost-effective for employees and communications that educate employees on generics’ safety, effectiveness and affordability can lead to increased generic usage and, ultimately, help in moderating health plan costs.