Mandatory Generic Substitution
- By Mark Bajus, CEBS
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- 01 Oct, 2016
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A Plan Design Change Whose Time Has Arrived
In the ever evolving drug plan environment, the latest “option” (and it’s not an option with a number of carriers, it’s their new standard processing format) is to make the substitution of a generic drug for a prescribed brand name drug mandatory, rather than optional. This type of processing has many advantages from a cost perspective, but it does come with some process issues that employers and employees need to understand.
The point of changing to this style of claims processing is to ensure the lowest cost drug is being prescribed. A generic drug is “a drug product that is comparable to a brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use”. As most plans require the employee to pay a portion of the cost of a prescription, lowering costs benefit both the employer and the employee. In BC, generic drugs are by law only allowed to be priced at a maximum of 25% of the original price of the brand name drug, before the brand name drug came off patent.
The issue has been growing in recent years as many prescriptions are being filled with brand name drugs when a generic is available. This is generally done by the doctor writing “no substitution” on the prescription: that way even if a generic is available, a brand will be dispensed by the pharmacist. In recent BFP client studies up to 10% of prescriptions were for brand name drugs when a generic substitution was available. SunLife has noted an increase of 138% in the fill rate of brand name Lipitor where a generic is available (brand cost $2.34 per dose, generic $0.56 per dose in Ontario). Because of this growing issue, carriers are quoting ever higher discount rates if the plan has mandatory generic substitution: recently we have seen as high as 6% claims reduction being quoted.
The new mandatory generic standard means even if a doctor writes “no substitution”, if a brand name drug is dispensed the plan only pays the generic equivalent cost, leaving the employee to pay the sometimes substantial difference if they really want the brand name drug.
But, what if for medical reasons you really need a brand name drug? In clinical studies, only 0.4% of patients had any medical issue with taking a generic instead of a brand, and that is due to the different non-active filler ingredients used in the generic compared to the brand. Sometimes, a generic can be tolerated when a brand can’t because of the same reason; different fillers. In any event, most claim payors will have a process where a detailed medical form can be completed by the employee’s doctor, and if approved, that specific employee will be allowed to be fully reimbursed for the brand name drug.
Mandatory generics are a plan design change we support, as it lowers costs for both employer and employee, without changing the medical outcome of an employee’s claim situation. Please contact us if you’d like to discuss this topic further.
Mark Bajus - CEBS, CLU, CFP - is the Director, Group Benefits for BF Partners. Learn more about Mark.
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