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What is stopping Canadians from choosing cheaper generic substitutes over brand name drugs?

Drug plan costs are on the rise, and generic drugs can provide huge savings for sponsors, group insurers and plan members.  Generic drug prices are declining, and it’s important to understand generics so that you can take advantage of benefit plan savings.

Brand name prescriptions are almost three times more expensive than generics, priced on average at $73.76 and $24.05 respectively, according to IMS Health Canada. Furthermore, a 1% increase in the utilization of generic drugs would provide more than $260 million in savings across Canada.

What is stopping Canadians from choosing generics? There is still a large stigma with patients with choosing generic drugs – it’s often perceived to be a weaker alternative to the ‘superior’ brand name drug.

Couponing in Canada

The Canadian drug industry has recently introduced coupons for brand name prescriptions. This is to encourage brand loyalty through:

  • Reduction of the employee’s co-insurance, deductible or co-pay; and,
  • Reimbursing the difference between the price of the brand name drug and the generic.

These coupons can be obtained through registration on drug manufacturer websites, or directly through physicians and pharmacists. They often make brand name drugs appear to be no more expensive than generics – but buyer beware.

The catch

Often, only the individual who uses the drugs will receive the discount.  If the individual has a drug plan with premium sharing, the expense may be passed on to the employer’s drug plan. In turn this is passed on to other employees through increased benefits costs, which lead to higher premiums.  Currently, only 5% of Canadian plan sponsors have insulated their plans from couponing.

Trust issues for generic drugs

Despite HealthCanada’s mandate for drug quality that applies to both brand name and generic drugs, some users are still sceptical of generics. It is well known that not all capsules are identical, and regulations allow for a variance up to 10% from the claimed dosage on the label. For approval by HealthCanada, generics must also be tested for bioequivalence to their originator drugs. These tests are very strict and comprehensive, thus we can be confident that generics and brand name drugs can be treated equally.

The reality of the situation

Since many drug plans will cover brand name drugs, consumers tend to use brand name alternatives “just to be safe”. Such behaviour will inconvenience plan members, and significantly drive up premiums in the long run.

The bottom line

The key to the prevention of rising drug plan costs will be the education of plan members. Once plan members are aware of the impact that higher costs drugs and coupons will have on their benefits and premiums, they can truly make informed decisions when it comes to choosing generics or brand name drugs.

Contact us if you wish to set up an employee education seminar about this topic with your team: 1-800-387-1670 x252.

Works cited:

http://www.benefitscanada.com/wp-content/uploads/2012/05/generic-drugs-report-2012.pdf