Uproar Over “Reference-Based” Medicare Pricing – Please

Here is an overview of the issue on the WSJ Health Blog.

First off, I am not sure I would call it reference based pricing when the rest of the world calls it mandatory generics.  In many states, this is even a requirement where the pharmacy has to fill a multi-source brand (MSB) with the generic equivalent of the drug.

[In English, what this means is that once a brand drug has lost it’s patent and the drug is available as a generic then the generic (which is typically much lower cost) has to be dispensed.]

So, the issue is that apparently Medicare plans don’t always point out that if members choose the higher cost brand product (Prozac versus fluoxetine) that they will pay more..and often a lot more.  Brand manufacturers raise their prices on the brands after they lose patent since they know there are people out there who really want to purple pill and not the generic white pill (for example).

I don’t know if Medicare plans allow it, but I know a lot of clients who allowed members to get the brand name drug at their copay (not at the drug cost) if the physician wrote the prescription for DAW (dispense as written).  The problem is the physician might simply do this at the member’s request even if they don’t need it.  From everything I have ever seen, it should be less than 1% of members who really need the brand versus the A-B equivalent generic.  (Look here for the FDA information on generics.)

I don’t disagree that for the 1% that have an allergic reaction to the inactive ingredients (e.g., blue dye #17) that there should be an exception process BUT we can’t build for the exception and manage costs.  Too many people will choose the easy path and drive costs up significantly.

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