Health Affairs: Modifying generic med substitution laws could slash almost $100M
With patent expiries for major name brand pharmaceutical drugs—Lipitor (atorvastatin; Pfizer), Plavix (clopidogrel; Sanofi-Aventis/Bristol-Myers Squibb) and Zyprexa (olanzapine; Eli Lilly)—on the horizon, switching to generic drug forms could save $100 million in Medicaid coverage costs. However, strict state generic substitution laws often require prior consent or step therapy approaches and make switching to generic brands difficult and costly, according to the results of a study published in the July edition of Health Affairs.

Patent expiration's, set to take place in 2011 and over the next four years, for these widely prescribed drugs, represent an “appealing opportunity to encourage patients to switch to generic products, and thus to reduce costs without major disruption in established medication regimens,” the authors wrote.

William H. Shrank, MD, of Brigham and Women’s Hospital and Harvard Medical School in Boston, and colleagues used Medicaid data to assess the relationship between state generic substitution laws and data for the generic and brand name versions of simvastatin (Zocor; Merck), a highly prescribed cholesterol-lowering drug, both prior to and after Zocor’s brand name patent expiration.

“By and large, state governments have relatively few tools available to influence Medicaid enrollees’ prescription drug use,” the authors wrote. “But by adopting policies that encourage the substitution of generic drugs after patents expire, states may greatly reduce costs without compromising quality.”

To prove this, Shrank et al looked at quarterly Medicaid data of filled prescriptions for generic simvastatin and brand name Zocor in the first quarter of 2006 (prior to the patent expire and availability of simvastatin) and in the third quarter of 2007 (subsequent to the generic being released on the market) to assess potential cost savings and the association to generic usage and state laws.

According to the authors, the state laws vary significantly with some requiring pharmacists to automatically substitute generic drugs, while some require patient consent. “The mandatory substitution and patient consent laws are separate statutes, and states could adopt one, both or neither of them."

The market patent for Zocor ended June 23, 2006, and at that time annual spending associated with the drug reached $4.6 billion. The researchers obtained both Medicaid reimbursement data for each product and data from the annual state boards of pharmacy published by the National Association of Boards of Pharmacy to gain data regarding state generic substitution laws.

During the study, the researchers divided total reimbursement costs per quarter for generic simvastatin and Zocor prescriptions by the total number of prescriptions filled per quarter to gather the mean cost per prescription per quarter.

Additionally, the authors compared savings for prescriptions between states that didn’t require consent, and those that did.

In 2006, 1.6 million Medicaid prescriptions were filled for both generic simvastatin and Zocor in 48 states and the District of Columbia. Shrank et al found that 492,443 simvastatin and Zocor prescriptions were filled in states that used mandatory generic substitution.

Additionally, the researchers found that 146,654 prescriptions for simvastatin and Zocor were filled in states that did not require patient consent during 2006.

“The aggregate of simvastatin and Zocor use constituted 25.8 percent of all statin use in 2006 in Medicaid programs nationally,” the authors found.

After patent expiry, half of simvastatin prescriptions were filled in the generic form two quarters after patent expiration, this number rose to 90 percent four quarters after patent expiration.

Six months subsequent to patent expiration, states that required generic substitution at pharmacies filled 48.7 percent of simvastatin prescriptions with generic versions compared to states that required permission to switch to generics that only filled 30 percent of the statin drug with a generic.

Comparatively, those states that did not require pre-authorization for the use of generics filled 98.1 percent of simvastatin prescriptions with the generic version six months after the patent expired—less than one-third were filled with generics in states that required patient consent.

Shrank et al estimated that states without patient consent laws paid $15.35 less per prescription than those that did require prior consent for the generic drug and $16.10 and $18.19 less in the second and third quarters, respectively. After patent expiry, these same rates for the fourth and fifth quarters decreased to $5.70 and $2.68 per prescription.

The researchers estimated that $19.8 million—12 percent of all drug costs for simvastatin—could have been avoided if all states had adopted a generic substitution policy that did not require patient consent.

“We found that laws providing patients with greater discretion in determining generic drug substation were most influential,” the authors wrote.

“Poor patients and less-educated patients—groups more likely to be covered by Medicaid—are least likely to express positive views of generics,” the authors wrote. “It may be the most vulnerable patients, for whom cost is the greatest barrier, who refuse generic substitution when offered.”

The researchers said that policy makers must decide whether they can “justify not realizing these savings” and should look at changing their laws to include automatic generic substitution. By extending savings from states that do not require consent to those that do, researchers estimated savings to be roughly around $100 million in Medicaid coverage for three medications—Lipitor, Zyprexa and Plavix.

“Although it is generally appealing to give patients more choice in their medical care, a more restrictive approach to generic substitution may lead to cost savings without compromising quality,” the authors concluded.