In AJMC, Oster & Fendrick Challenge Designation of High-Value Generic Drugs as "Non-Preferred" Based on Cost, Not Evidence

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Putting various branded drugs in "non-preferred" tiers and charging higher copays for them has been used for a number of years to steer consumers to use less costly medicines by giving them "skin in the game." But authors writing for The American Journal of Managed Care are alarmed by the policies of some insurers that now have designated entire classes of widely used generic drugs "non-preferred," leaving many patients without any low-cost treatment options for their diseases.

FOR IMMEDIATE RELEASE September 17, 2014 In AJMC, Oster & Fendrick Challenge Designation of High-Value Generic Drugs as “Non-Preferred” Based on Cost, Not Evidence

PLAINSBORO, N.J. — A disturbing trend has emerged recently in pharmacy benefits management, in which generic drugs are being placed into “preferred” and “non-preferred” tiers, like those that exist for branded drugs. An informal survey of plans reported today in The American Journal of Managed Care found that even staples like metformin, the standard first-line therapy for type 2 diabetes, are not off-limits from “non-preferred” status and higher co-pays for consumers.

These findings are outlined in an editorial published today by Gerry Oster, PhD, a medical economist at Policy Analysis Inc. in Brookline, Mass., and A. Mark Fendrick, MD, co-editor-in-chief of AJMC. In their piece, “Is All ‘Skin in the Game’ Fair Game? The Problem with ‘Non-Preferred’ Generics,” Drs. Oster and Fendrick discuss the ramifications of drug plans that leave some patients with no “preferred” or low-cost options to treat their diseases. For the full editorial, click here.

“When insurers don’t have any ‘preferred’ generic drugs on their formularies from which to choose, they are effectively saying to patients that their diseases are ‘non-preferred’,” said Dr. Oster, adding that, “Under these circumstances, it cannot be argued that these schemes motivate patients to become more prudent and cost-conscious; ‘skin in the game’ without choice is meaningless.”


Drs. Oster and Fendrick looked at 10 different classes of drugs—all recommended as first-line treatment in evidence-based guidelines—and report on the tiers that these medicines are in at six health plans across the US, all of which have benefit designs with two tiers for generic drugs. Two of the plans have one or more “preferred” agents in each of the 10 classes the authors examined. At the other four plans, however, there were no “preferred” agents in at least a few of the drug classes, including medications for epilepsy, Parkinson’s disease, migraine headache, and HIV. One health plan did not have any “preferred” agents in any of the 10 classes, and even designated the type 2 diabetes drug, metformin, a Tier 2 product.

Oster and Fendrick comment that while patients will suffer, they will not be alone. A wealth of evidence, the authors note, shows that higher out-of-pocket costs for patients invariably translate into lower rates of adherence, worse clinical outcomes, and higher overall costs of care. Drs. Oster and Fendrick also commented that several of the quality measures for accountable care organizations, which will determine how much physician groups will be paid by Medicare, are tied to improvements in key diabetes metrics. The authors question the logic of assessing physician performance according to these measures while simultaneously hiking up the costs to patients of generic drugs to manage their diseases. Such an approach also runs counter to the value-based insurance designs that are called for under healthcare reform.

“We question not only the fairness of such an approach, but also whether it makes sense from a dollar-and-cents perspective,” said Dr. Fendrick. “The evidence shows that when patients with chronic diseases fail to take their medication, they end up in hospitals and emergency rooms more often and are much more costly to treat.”

Oster added, “What these health plans were thinking is a complete mystery to us.”

About the Journal

The American Journal of Managed Care, now in its 20th year of publication, is the leading peer-reviewed journal dedicated to issues in managed care. Other titles in the AJMC family of publications are The American Journal of Pharmacy Benefits, which provides pharmacy and formulary decision makers with information to improve the efficiency and health outcomes in managing pharmaceutical care. In December 2013, AJMC introduced The American Journal of Accountable Care, which publishes research and commentary devoted to understanding changes to the healthcare system due to the 2010 Affordable Care Act. AJMC’s news publications, the Evidence-Based series, bring together stakeholder views from payers, providers, policymakers and pharmaceutical leaders in the areas of oncology, diabetes management, and immunology and infectious disease. To order reprints of articles appearing in AJMC publications, please call (609) 716-7777, x 131.

CONTACT: Mary Caffrey (609) 716-7777 x 144