Industry News

Brand Cholesterol Drug Costs Soaring

It’s “Sticker Shock” time again — This time in connection with cholesterol reducing brand drugs.

Pfizer has raised the cost of its block-buster drug, Lipitor, by a staggering 25.83% over the past 13 months.  Astra-Zeneca is not far behind — raising the cost of Crestor by 21.52% over the same 13 month period.  Note that both manufacturers raised their respective costs by 12% in a single month — from December 2010 to January 2011.  And while Schering-Plough has only raised the cost of its Vytorin by 12.36% during the last 13 months, such cost inflation is certainly nothing to be ignored.

Here’s a chart summarizing the three drugs’ cost increases, based on the cost of a single tablet of each drug:

Drug Name            AWP 12/09     AWP 12/10    AWP 1/11     % Change 12/09-1/11

Lipitor 10 mg             $3.21                  $3.61                 $4.04                25.83%

Lipitor 20, 40, 80     $4.58                  $5.15                 $5.76                25.83%

Crestor — All              $4.30                  $4.67                $5.23                21.52%

Vytorin — All              $3.92                  $4.41                $4.41                 12.36%

Given the high usage of cholesterol reducing drugs, every entity paying for drug coverage is certain to see its total costs soar in the coming months from the above cost manipulations.  Corporate plans, union plans, consortium plans, Medicare Part D plans, federal and state and municipal government plans, and yes, even the insurance companies that provide drug coverage to the above plans.  When brand drug manufacturers inflate their costs by 12% and 25%, everyone’s costs soar.

But if you’re fed up with brand drug manufacturers’ price manipulations, there is something you can do about it:  You can implement new programs to increase your generic drug usage.

There are several such programs you can try, including any – or all – of the following:

  • A mandatory generic drug program (where a member is required to use a generic drug, or pay the difference in cost between the brand drug and generic drug);
  • A step therapy program (where a member is required to try a generic drug before using the brand); or
  • A prior authorization program (where a member’s doctor must submit certain information to demonstrate the need for a brand drug, or the plan will only cover the generic drug’s cost).

Note:  A tiered formulary — where a member must pay a larger copay for brand drugs than generic drugs — may no longer be an effective means to motivate members to use certain generic drugs, because many brand manufacturers are widely distributing coupons to eliminate member copays.  If you “google” the above described brand drugs, you’ll see evidence of  manufacturers’ coupon antics, and you’ll see what we mean.

Note also:  The cholesterol reducing generic drug to which virtually all patients can safely switch is simvastatin.  If you have a “Pass Through Pricing” contract with your PBM (requiring it to invoice you for every retail and mail drug dispensed using its actual acquisition costs), simvastatin should cost you about $0.15 to $0.25 per tablet (depending on the dosage strength, and PBM with which you have a contract).  Needless to say, even 25 cents per tablet of simvastatin is considerably less than the lowest cost cholesterol brand drug, which is Lipitor 10 mg. at $4.04 per tablet.

If you don’t have a “Pass Through Pricing” contract for both retail and mail drugs, and your contract allows your PBM to invoice you based on its MAC cost, you will likely pay far more for simvastatin.  And you won’t have any control over how much more you pay, since your contract undoubtedly allows your PBM to select any prices it wants as its MAC prices.

Therefore, if your existing PBM contract still contains MAC provisions, this might be a good time to consider taking steps to get a new contract.  The best way to do so is through a PBM RFP, where you draft your own contract (eliminating all MAC terms, and requiring your PBM to provide “Pass Through Pricing” for every drug dispensed, among other matters), and bid the contract out in your RFP.  You can then use your RFP’s leverage to insist that your contract is accepted.

In today’s marketplace, where brand manufacturers are increasing their costs so egregiously, it’s imperative that every entity focus on maximizing generic drug usage, and ensure that every generic drug that’s dispensed will be invoiced using “Pass Through Pricing”.  Otherwise, you’ll be vulnerable to staggering manufacturer price increases, and you won’t be able to do a thing to control your prescription coverage costs.