Campaign Touts Use Of Generics

April 22, 2002
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Blue Cross Blue Shield of Michigan hopes to balloon $3.4 million into a far greater amount with a new ad campaign designed to steer consumers toward generic medications.

The state’s largest health insurer says a three-month competition held among pharmacists across Michigan to encourage the use of less-costly generics over name-brand drugs generated $3.4 million in savings for Blues subscribers during the fourth quarter of 2001, or $13.6 million in annualized savings.

While representing a mere fraction of the $2.4 billion that Blue Cross Blue Shield of Michigan paid out in 2001 for prescription drugs, up 13 percent from the prior year, the savings generated by the increased use of generics adds up and contributes to broader efforts to stem ever-rising health care costs and escalating health premiums, said Mike Strampel, a clinic program manager and pharmacist for the Blues.

“Every little bit helps. Obviously this is a significant part of our expenses,” Strampel said.

The Blues now plans to launch a $1 million public awareness campaign by the end of this month called “Generic Drugs — The Unadvertised Brand,” which will promote the use of generics to consumers. The insurer, with more than 4 million subscribers in Michigan, projects that a 1 percentage point increase in the generic dispensing rate will generate $17 million in annualized savings for its members.

A little more than 38.1 percent of the prescriptions that Blues members had filled in 2001 were for generic medications, which cost far less because the manufacturers do not have the associated research and development costs that reach into the hundreds of millions of dollars. The Blues says the average cost of a name-brand prescription drug last year was $66.50, which compares to $11.50 for a comparable generic medication.

Using the old adage “a million dollars here, a million dollars there, pretty soon you’re talking about real money,” Strampel says the biggest benefactors are consumers who pay lower out-of-pocket expenses and prescription co-pays by using generics.

“Seventeen million dollars is very real money to a lot of people,” Strampel said.

Health insurers and health-maintenance organizations in recent years have increasingly promoted the use of generic drugs through incentives to pharmacists and lower prescription co-pays for members who opt to use them. Pharmaceutical spending a decade ago “wasn’t even on people’s radar screens” since spending for prescription medications was a “distant third” to payments to physicians and hospitals, Strampel said.

“Drugs now are on everybody’s radar screen,” he said.

The change came in the 1990s with the introduction of numerous name brand and “blockbuster” medications coupled with a major increase in spending by the pharmaceutical industry to promote the new drugs, which resulted in significantly higher pharmaceutical utilization rates. The Blues cites data showing the industry’s promotion of brand-name prescription drugs rose from $9.2 billion in 1996 to $15.7 billion in 2000.

The net result is a major upward trend in prescription drug costs.

Many of the new drugs on the market “do wonderful things” and hold great health benefits for people, said Ed Keating, director of pharmaceutical services for Priority Health.

“The challenge they bring to the world is the unbelievably high domestic cost of medications,” Keating said.

A report issued last September by the Center for Studying Health System Change, a bi-partisan think tank supported by the Robert Wood Johnson Foundation, showed that spending in the U.S. for prescription drugs rose 14.2 percent in 2000 — more than twice the 7.2 percent rate of overall health care spending that year, although down from the 18.9 percent increase of 1999. The same study showed that hospital spending accounted for the largest share of health care costs in 2000, the most recent year for which data is available.

The pharmaceutical industry criticized the study, saying it did not take into account the health benefits new medications bring.

The development of new medications, coupled with their aggressive promotion by the industry, have made pharmaceuticals the largest reimbursement category for Blue Cross Blue Shield of Michigan and many other insurers and HMOs, such as Priority Health in Grand Rapids, surpassing payments to physicians and hospitals for inpatient care.

Priority Health, with more than 300,000 members in western Michigan, paid $101 million in prescription reimbursements in 2001 and has seen that figure rise by about 15 percent annually for some time, Keating said.

Priority Health has promoted the use of generics since the mid-1990s through financial incentives to pharmacists of up to $2.50 per prescription and lower co-pays on the consumer level, he said. While Priority Health isn’t considering the kind of public awareness campaign the Blues is, it will continually look for methods to drive the increased use of generics, Keating said.

He welcomes the public awareness effort of the Blues as beneficial to everybody.

“Communication is the prescription for success,” Keating said.

Blue Cross Blue Shield of Michigan, which pays pharmacists an incentive of up to $1 per generic prescription they fill, hopes to generate a 1- to 2-percentage point increase annually in the use of generics by its members. The goal is to affect the sizable annual increase in what it spends each year on prescriptions, Blues spokeswoman Helen Stojic said.

“It’s more of managing the trend,” Stojic said “We’re just looking at increasing (the use of generics) as much as we can in the next year or so, and we’ll see where we go.”           

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