The University Record, July 9, 2001

U-M tries to control prescription costs

Editor’s note: Late in 2000, Provost Nancy Cantor and Robert Kasdin, executive vice president and chief financial officer, charged the Prescription Drug Work Group 2002 with examining prescription drug coverage in University health plans. The following article examines some of the issues the Work Group considered as it looked at various plan designs and cost containment measures.


By Kate Kellogg
Human Resources and Affirmative Action

Employers are struggling to maintain top-quality prescription drug benefits without passing increased costs on to employees. During 2000, the University spent about $30.7 million for prescription drugs for approximately 89,000 employees—a 20 percent increase over 1999 amounts, according to the Report of the Prescription Drug Work Group 2002.

The University is considering options for improving the quality and cost effectiveness of the drug benefit plan. Members also can take steps to control costs while maximizing their benefit.

Generics and OTCs

Use of generic drugs can save money on prescriptions without sacrificing quality.

Generic drugs are unbranded versions of brand-name drugs for which patents have expired; once off patent, competition keeps their prices down. Generics cost about 40 percent less, on average, than brand-name drugs.

Generics have the same active ingredients as their brand-name equivalents and are regulated by the U.S. Food and Drug Administration (FDA), but some people have concerns about the safety of generic drugs.

A recent FDA review of the bioequivalence of the 273 generic drugs approved in 1997 found just a 3.5 percent difference, on average, between generic and branded drugs, according to the July issue of Consumer Reports.

“Physicians sometime write Dispense as Written (DAW) for a very few brand-name drugs that have a narrow therapeutic index,” says John E. Billi, associate dean of clinical affairs in the Medical School and a member of the Work Group. “But the vast majority of generic drugs are perfectly safe for anyone.”

Consumers shouldn’t assume that physicians and pharmacists always make generic substitutions.

Most health plans encourage, if not require, pharmacists to offer generic substitutions for brand-name prescriptions as long as the physician has not written DAW. Pharmacists generally comply, says Duane Kirking, professor of pharmacy and member of the Work Group.

“Prescription drug plans with three-tiered copay systems provide a great incentive to the patient to check for generic substitutions,” Kirking says. “If generic drugs are on the lowest copay tier, patients are more likely to request generic equivalents when available.”

Another alternative to brand-name drugs is nonprescription drugs. Some over-the-counter (OTC) drugs are just as effective for certain conditions as prescription drugs and less costly for both the health plan and the patient.

“Nonprescription antacids can work more quickly for some cases of acid reflux (heartburn) than prescription drugs,” Kirking says. “If you’re paying a $14 copay for brand-name prescriptions, you save a lot of money by going with an OTC.”

The power of advertising

Many health professionals believe direct-to-consumer (DTC) advertising contributes to high drug costs. Critics say pharmaceutical companies spend excessive amounts on marketing that encourages consumption of high-priced drugs. The 11 firms in the Fortune 500 drug-industry category spent just 12 percent of revenues on research and development and 30 percent on marketing and administration, according to Consumer Reports’ June issue.

“On one hand, I applaud the industry for educating the public about the potential role pharmaceuticals can play in treating serious problems like high cholesterol,” Billi says. “But television advertisements often don’t clearly inform patients of all the potential side effects.”

These ads lead patients to expect their doctors to prescribe the medication advertised—even if a less expensive alternative will work just as well for them.

More cost-saving strategies

Another way patients and physicians can work together to manage drug costs is through dose optimization. Multiple-dose prescriptions not only keep costs high, but sometimes interfere with compliance, Billi said.

“Most people find it easier to remember to take a drug once a day rather than several times a day,” Billi says. “People should check with their doctors and pharmacists to see if they really need split doses.”

With antibiotics, a number of studies have shown that most respiratory infections are not caused by bacteria and therefore are not treatable with standard antibiotics, Billi says.

“Yet doctors frequently feel pressured to prescribe antibiotics because the patient is under the misconception that antibiotics will speed the recovery process,” Billi says. “This is not just a cost issue; it is a significant public heath hazard. The more antibiotics people take, the more likely they are to experience side effects and build up a resistance.”

Information sharing is an essential part of prescription drug management. The Mayo Clinic recommends that people periodically review all the medications they are taking with their primary care physician. The doctor then can determine whether they still need all the medications and whether lower-cost alternatives are available.