Plan sponsors know that increasing a plan's generic dispensing rate is the key to lowering pharmacy benefit costs. Today, nearly all co-pay plans offer a lower co-pay for generic drugs. In addition, many plans have mandatory generic programs or “dispense as written” penalties in place.

Until recently, generic medications have become cheaper over time. Now they’re on the rise, thanks to raw material shortages, industry consolidation, and generic manufacturers pulling out of certain drugs. Unfortunately, this trend is expected to continue.

What Can Employers Do About Rising Generic Prices?

An employer’s best defense against rapidly rising generic drug costs is getting the help of an unbiased consultant. An effective consultant works aggressively to shield clients from generic price increases by negotiating pharmacy benefit management (PBM) contracts free of caveats that limit which generics are included in generic pricing guarantees. This is crucial because many PBMs try to exclude certain generics from their generic discount guarantees.

Consultants can also help employers ensure their pharmacy benefit contract generic pricing guarantees are solid and auditable. Appropriate generic pricing guarantees will ensure that minimum discounts off of average whole prices (AWP) will be achieved at retail and via mail. If these guarantees are not met, the PBM will be required to reimburse the plan.

Other creative plan designs may help drive utilization to the lowest cost generics where options are available. For example, a plan may put in a "preferred generic" tier with a lower co-pay and a "non-preferred generic" tier with a higher co-pay. Other options are available for high-deductible health plans and for specific disease states.

If your plan is experiencing generic inflation, or if you have questions about your contract’s generic pricing guarantees, work with an unbiased consultant to learn what steps you should take.

Sarah Martin is vice president, senior actuarial consultant, in the Pharmacy Analytics Practice of Lockton Benefit Group.

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