Generics discounts ignite Medicare Rx competition
Just when you thought the low end of the generic drug price spectrum couldn’t get any more commoditized, the $2 price point debuted with a big splash in September 2010.
Walmart stores tossed the rock that made the splash when it partnered with insurance giant Humana to launch a new, steeply discounted Medicare Part D drug coverage plan for 2011. Four months after both companies announced the venture, the ripple effects are still washing over retail pharmacy. But its long-term impact — namely, its ability to wrest a big chunk of the huge prescription drug market for seniors away from Walmart’s competitors and move it to Bentonville, Ark. — remains to be seen.
The strategy behind the launch of the Humana Walmart-Preferred Rx Plan is almost stunning in its simplicity and its boldness. For a cut-rate monthly plan premium of $14.80, Medicare beneficiaries in all 50 states can gain access to basic Part D drug coverage costing less than half the average national monthly premium set by prescription drug plans serving Part D, according to Walmart and Humana. But the real market-moving potential comes from the plan’s ability to lure Medicare beneficiaries to Walmart’s own stores.
To wit: The Preferred Rx Plan gives favored status to seniors who fill the Part D prescriptions at Walmart stores’ own pharmacies. Medicare beneficiaries who enrolled in the plan get low co-payments when they fill their prescriptions at a Walmart, Neighborhood Market or Sam’s Club pharmacy, with in-store co-payments that start as low as $2 for generic prescriptions at the company’s own pharmacies.
In effect, the plan cuts in half the out-of-pocket costs many Americans pay for widely dispensed, multisource medicines.
“This new co-branded prescription drug plan,” the two companies asserted, “can save a typical Medicare Part D beneficiary who enrolls in the Humana Walmart-Preferred Rx Plan an estimated average of more than $450 in 2011 on plan premiums, prescription medication co-payments and cost-shares, when compared with the average total costs for a Part D prescription drug plan in 2010.”
It wasn’t long before Walmart’s competitors jumped into the $2 generic co-pay contest. In late November, Kroger and Safeway became the first big pharmacy operators to respond, announcing a new, low-price plan for Medicare beneficiaries, in partnership with UnitedHealth Group. Like Walmart/Humana, the plan is a game-changer.
Called Pharmacy Saver, the new program is a collaboration among Kroger, Safeway and United’s Prescription Solutions affiliate. It will allow members to purchase some generic scripts for $2 for 30-day and some 90-day supplies. It applies to hundreds of prescription drugs, including 8-of-the-10 generics most commonly used by UnitedHealthcare Medicare plan members.
Within a few weeks of that announcement, Target, H-E-B, Hy-Vee, Publix Super Markets, Food Lion, Bloom, Harveys and Sweetbay Supermarket all joined the insurance company’s Pharmacy Saver program, in time for the plan’s launch at the beginning of this year.
For millions of seniors, that means that the new price expectation for hundreds of commonly used generics is two bucks for a 30-day supply. For the nation’s pharmacy retailers, it means that the competition for the low end of the generic prescription market is tougher than ever.
Jim, Retail pharmacies are learning that generic drugs turn pharmaceutical channel economics upside down. The costs of distributing and dispensing a traditional (non-specialty) generic drug far exceed the actual cost of the medicine, which is the opposite of brand-name drugs. Thus, the generic market is starting to look like a cash-pay consumer product instead of a brand-name pharmacuetical. FYI, I wrote about the economics of the new plan in Walmart-Humana: An Inevitable Surprise for Pharmacies and PBMs (http://www.drugchannels.net/2010/10/walmart-humana-inevitable-surprise-for.html). Adam
Three issues that will define 2011
Years 2009 and 2010 were up and down for the generic drug industry and its main trade group, the Generic Pharmaceutical Association. On one hand, there were the departures of president and CEO Kathleen Jaeger and member company Teva Pharmaceutical Industries. On the other, a regulatory approval pathway for follow-on biologics was created — though it granted longer market exclusivity periods to biotech drugs than the GPhA desired — and there were increases in the use of generics, which accounted for 77% of dispensed prescriptions in the first half of 2010, according to IMS Health.
But 2009 and 2010 are behind the industry, literally and figuratively. In interviews with Drug Store News, GPhA VP regulatory science Gordon Johnston and IMS Health VP industry relations Doug Long spoke about three issues that will be important for the industry in 2011 — probably in a good way.
1. Drug safety : Drug approval in the United States is no easy task because of the strength of the Food and Drug Administration’s regulatory system. But the system still has weak points — particularly the inspection of foreign manufacturing plants. According to a September 2010 Government Accountability Office report, while the FDA inspected more than 1,000 domestic manufacturing plants in fiscal 2009, it inspected 424 in other countries, around 11% of the total.
That could change soon. “Whether supply chain safety comes in the form of legislation or FDA regulations, we … expect to see something coming down the pike in 2011,” Johnston said. Long, however, told Drug Store News he didn’t expect to see “anything major” this year.
2. Generic user fees : A perennial problem facing the generic drug industry is the backlog of applications at the FDA’s Office of Generic Drugs — and it keeps getting bigger. According to the GPhA, the number of applications submitted to the office increased from 361 in 2002, to 830 in 2008, creating a backlog of almost 2,000 applications in 2010, according to a presentation by office director Gary Buehler at the GPhA’s 2010 annual meeting. While federal regulations allow six months’ review time for an application, in practice it often takes 21 months.
Johnston said he expected a user fee program to be implemented by 2013. “I expect that a user fee program will be designed and recommended this year, with [the] industry and FDA working together,” he said.
Long agreed. “There is a very good possibility that user fees will be passed by Congress in 2011,” he said.
3. Patent settlements : When a generics company wants to market its version of a drug ahead of the branded version’s patent expiration, it will file an application with a paragraph-IV certification, asserting the patent is invalid, unenforceable or won’t be infringed, thus usually prompting a lawsuit from the branded drug’s manufacturer. In most cases, the two companies will settle, allowing the generics company to market its drug ahead of patent expiration in exchange for not immediately launching. Delaying launch after a patent has expired would be illegal.
The Federal Trade Commission has assailed the settlements as “pay-for-delay” deals and has sought to ban them, asserting they cost taxpayers $3.5 billion per year. The FTC may find its efforts frustrated with the Republican majority in the House, but it could use other means as well. Johnston said the outcome in Congress was difficult to determine. “Regardless of what happens on the legislative front, this issue may go to the Supreme Court to decide,” Long said.
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ReportersNotebook — Chain Pharmacy, 2/7/11
SUPPLIER NEWS — The Food and Drug Administration has approved a generic drug made by Watson Pharmaceuticals for cancer-related breakthrough pain, Watson said. The drug is a generic version of Cephalon’s Fentora, which had sales of around $179 million during the 12-month period ended in November 2010, according to IMS Health.
The FDA has approved a generic version of Duramed’s contraceptive Seasonale (levonorgestrel and ethinyl estradiol) made by Sandoz, the generics arm of Swiss drug maker Novartis. Branded and generic versions of Seasonale had sales of around $91 million during the 12 months ended in November 2010, according to IMS Health.
Spectrum Pharmaceuticals and Viropro plan to develop a biosimilar of Genentech’s Rituxan (rituximab), used to treat cancer and autoimmune disorders. The companies plan to develop the biosimilar in anticipation of expirations on Rituxan’s patent protection over the next few years. Rituxan had sales of $5.6 billion in 2009, according to Spectrum.
Merck plans to develop biosimilars under a partnership with drug industry services organization Parexel International that will give Merck access to its clinical and regulatory services. Financial terms of the deal were not disclosed.
Mylan subsidiary Dey Pharma has launched MyEpiPenn, a smart phone application for patients at risk of severe allergic reactions, which is tied to its EpiPen product.
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