Is E-Prescribing Good Or Bad For Pharma?

With e-prescribing finally reaching some critical mass here in 2010, this is an important discussion point. A decade ago (in a different prescription environment), the manufacturers were very excited about the opportunity to help drive formulary choice and have messaging to the prescriber during the drug selection process. Now, I think there are two major impacts related to the manufacturers:

1. Formulary / Clinical Management
   

   From a PBM perspective, the “holy grail” of eRx is that they can push decisioning and information to the point-of-prescribing (i.e., the physician’s office). This should make it easier to drive formulary utilization (brand and generic) and also implement more utilization management programs (i.e., step therapy, prior authorization, quantity level limits).

2. New Rxs
   

   Depending on what research you look at, anywhere from 10-30% of prescriptions that are written are never filled (for a variety of reasons). Let’s assume all of those have a reasonable chance of being filled.

So, on the one hand, from a brand manufacturer perspective, I’m likely to have less and less ability to influence choice of prescriptions through detailing and DTC advertising…leading to a higher generic fill rate. Although if I am the drug on formulary, I’m more likely to be chosen.

On the other hand, I’m likely to get more claims.

So, how does this work out mathematically? I have no idea, but here’s my thoughts.

• 70% generic fill rate today
• 85-90% generic fill rate is probably clinically possible between today’s generics and those coming off patent in the next few years
• So, out of every 100 claims today, there would be 15 less brand Rxs. BUT, I would assume most of this would happen without eRx so let’s assume the technology either accelerates or drives an additional 5% generic fill rate. They lose 5 brand Rxs due to eRx.
• 100 claims today goes to 120 claims (taking the midpoint) when capturing all the Rxs written (and getting them to fill by addressing their barriers)
• They get 10% of the net new 20 claims…which is only 2 claims.
• So, they are down 3 claims.

BUT…Don’t forget that the brand manufacturers make ~50% of the generics in the US. So, of the 23 net new generics (5 + 18), they get 11 new claims. This is a net positive of 8 claims (per 100) although at a different profit mix.

So, assuming 3.3B prescriptions claims per year in the US, this means a growth of 264M claims per year (8%) but they are trading brand claims which should be more profitable for generic claims.

Someone will have to help me understand if this is good or bad.