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High-cost generic programs decrease drug spend in 5 plans


AMCP 2016 conference presenters from MedImpact outline their High-Cost Generic program that moves members to less-expensive, clinically relevant drug alternatives.

While the high cost of specialty drugs is expected, generics have always been a saving grace for drug costs. That isn’t necessarily so. Prices rose more than 10% in 2015, according to Truveris, a healthcare data company.

BurgdorfOn Wednesday, April 20, at the Academy of Managed Care & Specialty Pharmacy Annual Meeting 2016, James R. Burgdorf, PhD, health economist, and Sara Erickson, PharmD, health outcomes researcher, both with MedImpact Healthcare Systems, described a study by their company to move members from high-cost generics to lower- cost alternatives.

In “Strategic Management of High-Cost Generics: Outcomes of a Novel Clinical Program,” Erickson outlined the drivers of high-cost, generic drugs: Market consolidation of manufacturers, closed distribution systems, more stringent manufacturing standards, raw material shortages and an FDA backlog of abbreviated new drug applications. She added that there are 4,000 generics currently in the queue for approval.

A high-cost, generic strategy should increase awareness of the problem, shift utilization to less-expensive, but clinically relevant alternatives and minimize member and provider disruption. She emphasized that generic alternatives must achieve clinical efficacy, exhibit a positive side effect profile, offer a cost-savings potential and stand up to P&T review.

For example, a 150-mg capsule of venlafaxine ER, an antidepressant, for $7 could substitute for a $71 tablet of the same dose.

EricksonErickson described the components of MedImpact’s High-Cost Generic (HCG) program: Aligning member copayments for HCGs by moving the drugs to a preferred brand tier, advance member notification of an upcoming benefit change with information about lower cost alternatives, soft point-of-sale messaging at retail pharmacies and active prescription conversion through provider fax notification. The program included quarterly program maintenance, including these same strategies, along with analytics and clinical review to identify targeted HCGs and alternatives and review and approval by the P&T committee.

The five plans in the study experienced sizable decreases in HCG spend after their implementation dates. Erickson says HCG per -member per-month (PMPM) spend declined after program introduction but questioned how MedImpact could be sure that spending wouldn’t have decreased despite the program.

She expressed her doubts by challenging the following three possibilities:

  • If plans implemented the program at the peak of the problem, spend would have dropped without the program.

  • If plans with the largest HCG problems are more likely to initiate a program, then spending could have dropped anyway.

  • Some other trend or phenomenon could have caused the decrease.

Next: Comparing the differential effects


The presenters walked the audience through a difference-in-difference evaluation model that uses observational study data to compare the differential effect of an intervention on a treatment and control group.

MedImpact’s study used HCG-naïve clients in control groups, which were matched to invention groups by business type. A year prior to the start of the program, control groups had a persistence of HCG spend of greater than $1 PMPM, a variability in HCG spend of less than two times that of the intervention plans and time trends similar to those of intervention plans.

Although there was an increase in alternative lower-cost drugs in three plans, all five showed a significant spend decrease. A year prior to the program, there was an average of 2.8 claims/100 lives for HCGs, dropping to 1.7 claims/100 lives during the program’s first year. Four out of the five plans experienced a drop in the rate of claims per 100 lives. Finally, the HCG program significantly decreased HCG spend in all five plans, dropping between $1.13 and $3.44.

MedImpact also studied the impact of a program on HCG and alternative drug utilization within a cohort of members receiving advance communication about recent past HCG use and a pending benefit change.

Almost one-third of the intervention cohort switched to a lower cost alternative compared to 14.1% in control groups. In addition, when program members did not receive a point-of-service message, only 12% made a switch to the new benefit, while 52% did once the message was posted.

Erickson summed up lessons learned from the HCG program:

  • Significant plan savings can be achieved through shifting utilization from HCGs to lower cost alternatives.

  • Increased member cost share for HCGs incentivizes switching.

  • Listing lower-cost alternatives in an advance notification to members, along with point-of-sale messages and provider outreach, facilitates switches to lower cost alternatives.

Mari Edlin is a frequent contributor to Managed Healthcare Executive. She is based in Sonoma, California.


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