Private Insurers Implementing Policies Making Generic Substitution Mandatory

Abstract

Two of Canada's major private insurers are borrowing a page from their public-sector counterparts, by implementing mandatory generic substitution for employer drug plans. In the past few months, both Sun Life Financial and Great West Life have implemented new rules on reimbursement in a bid to contain drug payment costs. The changes are expected to have a significant impact; together, the 2 insurance companies administer about half of Canada's private health plans. In an update on group benefits issued April 2012, Sun Life called its new policy “the next step in generic substitution” — aimed at reducing costs for clients and ensuring long-term drug plan sustainability. It stated that the average claim on brandname drugs is approximately $72, versus only $27 for generics. Under the new rules, Sun Life will reimburse only the cost of the lowest-priced equivalent drug (usually the generic version). “This means that even when a doctor writes ‘no substitution’ on the prescription, the member will be reimbursed for the lowest-priced equivalent,” the update read. Initially, the change was to apply only to new plans (effective May 1, 2012). Great West Life introduced similar changes to all new plans in December 2011 and in mid-2012, extended the policy to existing plans. It stated, “…benefits will be based on the cost of the lowest-priced interchangeable drug that has the same medicinal ingredients. A plan member can choose to pay the difference in cost and still purchase the prescribed drug.” The insurers are allowing for some exceptions; the higher-cost drug will be covered if the plan member provides medical evidence that a prescribed brand-name drug cannot be substituted. The brand-name pharmaceutical industry has expressed concern about the insurers' new policies. They argue it restricts freedom and in some cases, will force changes on patients for purely cost-containment reasons. “We believe that health care professionals, working hand-in-hand with their patients, are best positioned to make the safest, most effective treatment decisions,” says Russell Williams, president of Canada's Research-Based Pharmaceutical Companies (Rx&D). The brand-name industry appreciates the “very serious fiscal pressures facing all payers,” says Mr. Williams, while adding that “new, more scientifically advanced medicines are actually a critical tool in building a more sustainable system and productive workforce overall. In restricting access to innovative medicines, we risk impacting health care costs negatively by increasing the need for hospitalizations or more costly interventions.” The generic industry, on the other hand, has welcomed the changes. The insurance companies are responding to the growing use of reimbursement coupons for brand-name drugs, according to Jeff Connell, vice president, corporate affairs, with the Canadian Generic Pharmaceutical Association (CGPA). “These programs claim that they ‘pay the difference between the brand and the generic,’ but that's not true if the private drug plans don't have strict no-substitution policies,” he says. “The coupons are the payer of last resort, which means if the card is presented at a pharmacy and the drug plan has loose rules, the employer pays the difference.” Sun Life has said that the number of doctors writing “no substitution” on prescriptions has dramatically increased. For example, says the insurer, nosubstitution claims for Lipitor — which went off patent in 2010 — have increased 138% so far this year. This trend is directly related to the coupon incentives that many brand-name drug companies have developed, says Mr. Connell. “We congratulate Sun Life and Great West Life for putting the brakes on the costs to their clients with absolutely zero impact on patient care.”