Libratto

DEPARTMENT OF RANTS

It’s hardly news: copayments for prescription drugs continue to rise. A press release from Compdata Surveys reports that copayments for generic, formulary brand and non-formulary brand drugs have all increased this year.

“Nationally, employees now pay an average of $10.89 for generic drugs, $24.02 for formulary drugs and $39.70 for non-formulary drugs on a flat dollar co-pay plan. In 2005, the average prescription co-pay for a generic prescription was $10.60, while a formulary drug cost $22.83 and a non-formulary prescription cost $37.48.”

But dig a little deeper, and it gets a bit more interesting.

First, let’s take a look at those increases on a percentage basis:

Generic copay: +3.7%
Formulary brand copay: +5.2%
Non-formulary brand copay: +5.9%

Next, let’s look at prescription drug inflation. According to Express Scripts Drug Trend Report, prescription drug inflation was 5.3% in 2005 (i.e. over 2004). But what’s really interesting is the substantial difference between generic and brand drug inflation rates. Manufacturers of brand-name products — who due to patent protection enjoy a monopoloy — drove inflation for their product up an average of 7.2%. Generic prices barely budged, with an inflation rate of only 0.4%.

Bottom line: relative to underlying price changes, generic copayments are going up more than they should, while copayments for brands are lagging behind. Far better for plan sponsors to keep generic copayments steady and raise copayments for brands, especially for brands that are not on their formularies.

Note: I am employed by Express Scripts.

Opinions expressed are those of the author alone.