The much anticipated launch of the generic version of Lipitor is highlighting the pricing conundrum of the generic exclusivity period where often a new-to-market generic is more expensive than the brand version net of rebate. With generic Lipitor being more expensive than the brand, payers are contemplating encouraging the brand but wondering if this is a “penny wise and pound foolish” strategy. Much negative and often one-sided press is written about Brand Pharma’s tactics to maintain market share when they provide aggressive rebates to reduce the total brand cost below the first to market generic. The good news is that payers can purchase the lowest cost drug, whether brand or generic, by utilizing the following strategies and asking about key Pharmacy Benefit Manager (PBM) contracting provisions which are detailed below.
Payers should consider different pricing strategies at retail and mail (or 90-day at retail through captive retailers like CVSCaremark).
At mail (or captive 90-day retail chain network), the pharmacy can dispense the lowest priced product (typically the brand net of rebate), which is often referred to as the “house brand” for the generic until the generic price is the lowest.
At retail, payers have several options:
- Option 1: The most cost efficient tactic is to block the generic NDC until the price falls below the brand product net of only the payer’s portion of the rebate. Members should be allowed to fill brand Lipitor at the generic copay under this strategy.
- Option 2: Place brand Lipitor on the 1st tier and the generic on the 3rd tier. Again, this strategy should only be implemented as long as the brand price net of the PAYER’S portion of the rebate is more advantageous for the plan sponsor.
- Option 3: Absorbing the new-to-market generic exclusivity costs (typically 180 days) to migrate as many members as possible to the generic. After the generic exclusivity period ends and multiple manufacturers enter the market, there has historically been significant price advantages (even net of the brand rebates) to maximizing generic utilization.
*Note – Once the generic is less expensive than the brand, to maximize generic utilization, payers should consider adding a penalty each time the brand name medication is filled.
There are some key contractual and cost share questions you should ask your PBM before diving into one of these strategies headfirst:
- Will you receive 100% of the rebate for the substitution (or will the PBM)? If the PBM shares in your rebates earned or you have a guaranteed per script rebate the net cost should be adjusted to show the true cost to your organization.
- How will the “house brand” claims be accounted for in the discount guarantees (brands, generics, or excluded)?
- How will this affect your generic dispensing rate guarantees?
- How will this affect member cost share contributions (depending on the strategy selected)?
Truveris can help with these strategies and review accurate claims adjudication prior to payment.
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Kristin Begley, Pharm.D.