Some Consumers Must Buy Brand Name Drugs, Not Generics

Contradicting standard advice given to most patients that the preferred medication is a less-expensive generic medication, rather than a brand-name drug, some health insurers are telling consumers the opposite: they must buy brand-name drugs even when cheaper generics are available. Driven by better margins for pharmacy benefit managers (PBMs), the practice leaves patients paying higher out-of-pocket costs.

The practice, report The New York Times and ProPublica, is not limited to generics, but is also spreading to biosimilars. UnitedHealthcare recently informed healthcare providers that it prefers the reference biologic drug Remicade (infliximab) to the infliximab biosimilars that have recently become available at lower list prices.

The Times—ProPublica article states that a preference for more expensive branded drugs has appeared sporadically for years, but is increasing as pharmaceutical companies maximize efforts to extract the last profits from products that face cheaper generic competition. “Companies are cutting deals that give consumers little choice but to buy brand-name drugs,” the report notes, and sometimes patients end up paying more than they would for generics. In recent months, some insurers and PBMs have insisted that patients forgo generics and buy brand-name drugs including Adderall XR, a treatment for attention-deficit/hyperactivity disorder (ADHD); Zetia, a cholesterol treatment; Aggrenox, a stroke-prevention drug; and Voltaren, a pain-relieving gel.

Some health insurers require members to have prescriptions filled with brand-name drugs and do not charge them more than they would for generics. However, for the 29% of Americans with employer-provided health insurance who have high-deductible insurance plans, picking up the cost difference between branded and generic drugs is a heavy burden, as they have to pay the full sticker price of medications before they meet their deductibles.

A spokesman for UnitedHealthcare acknowledged that the insurer at times prefers brand-name drugs, but said that by “providing access to these drugs at lower cost, the company is able to improve affordability for customers and members.” Many patients, however, are unaware that pharmacies and physicians can seek an exemption from the insurer if they want the generic instead, according to The Times—ProPublica article.

Shire, for example, has negotiated discounts with PBMs and insurers to preserve much of its market share—29% last year. (Most brand-name products’ market share falls to less than 6% in the 2 years after the introduction of the first generic competitor.) Shire and other brand-name drug makers are no longer content to allow sales of their products to plummet when generic competitors appear in the marketplace, the report states, and negotiate arrangements so PBMs and insurers afford a preferred-drug status to their products.

A Shire spokesperson was quoted in The Times—ProPublica report as saying that the company was able to hold onto market share for Adderall XR by offering insurers and government programs prices that are competitive with those of generics. Shire has given increasing discounts to PBMs and insurers for preferential treatment of their products, a deal that did not mean lowering the drug’s list price but rather negotiating rebates that were paid to insurers and PBMs rather than to patients.

In December, CVS Caremark informed pharmacies that some of its Medicare prescription drug plans would cover only branded versions of 12 drugs. Some of those drugs have had generic competitors for over a year. Among the products affected by this change were the antipsychotic drug Invega, as well as the multiple sclerosis treatment Copaxone. Because Medicare cannot, by law, negotiate directly with drug manufacturers, the public pays the bill when Medicare enrollees’ drugs cost more.