Free prescriptions do not always increase use of generics

Generics/Research | Posted 12/10/2018 post-comment0 Post your comment

One strategy to increase the use of generics is to offer them free of charge. This strategy presumes that this will shift demand away from expensive brand-name drugs and produce savings for insurers and customers alike. In order to test this theory, researchers from the University of Maryland studied co-payment data from Medicare recipients# to see if offering zero generic co-pays for oral antidiabetic drugs (OADs) and statins increased generics use among low-income subsidy (LIS) patients with diabetes.

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Recent studies based on analyses of Medicare beneficiaries’ use of statins, anti-depressants and antidiabetic drugs in Part D* plans with and without zero co-payment tiers support the strategy of offering generics free of charge. However, these studies do not account for formulary exclusions and used cross-sectional designs that are potentially sensitive to selection bias, i.e. if beneficiaries with a preference for generics are drawn to plans offering them at no cost, this unobserved behaviour will confound the true impact of zero co-pays on use of generics. Therefore, the authors designed the current study to be free of both sources of bias.

The authors used 2008 data from a 5% random sample of the Medicare population with diabetes from the CMS Chronic Condition Data Warehouse (CCW) using Part D claims, formulary provisions and co-payment tiers. Some plans placed selected generic OADs and statins on zero co-payment tiers whereas others did not.

The results showed that the demand for generic OADs was not significantly different in plans with and without zero co-payment tiers. By contrast, a large difference was observed in the per cent of LIS recipients using generic statins in plans with zero co-payment tiers (61.4% vs 54.6%; p < 0.01). However, the difference disappeared once this was controlled for formulary restrictions on the most popular brand statin at the time (Lipitor).

The authors concluded that ‘some Part D plans use both the pull of free drugs and the push of formulary restrictions to achieve higher rates of generic use. In this study, the push, rather than the pull, proved effective. This cautionary tale suggests that policymakers should give greater consideration to formulary provisions when evaluating the effects of free generics in VBIDs [value-based insurance designs]’.

#Medicare is a national social insurance program, administered by the US federal government since 1966. It provides health insurance for Americans aged 65 and older who have worked and paid into the system. It also provides health insurance to younger people with disabilities.

*Medicare Part D, also called the Medicare prescription drug benefit, is an optional US federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs through prescription drug insurance premiums.

Conflict of interest
Dr JS Dougherty is employed by PhRMA, a trade organization representing drug manufacturers. The other authors of the research paper [1] declared that they had no conflict of interest.

Editor’s comment
Readers interested to learn more about how co-payments affect use of generics are invited to visit to view the following manuscripts published in GaBI Journal:

Pharmaceutical policy interventions in times of economic recession

Strategies for pricing of pharmaceuticals and generics in developing countries

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Related article
Medicare data shows savings to be made with generics use 

1.  Stuart B, Hendrick F, Dougherty JS, Xu J. Does the offer of free prescriptions increase generic prescribing? Am J Manag Care. 2017;23(6):e193-e201.

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