After making deals with drug companies, some insurers insist on brand-name drugs over generics

Pills in pill container
The many Americans who have high-deductible health plans can be hit hard by the price difference between brand-name drugs and generics if their insurer will only cover the former. (Getty/Viperfzk)

After they lose patent protection on certain medicines, some drug companies are striking deals that encourage insurers and pharmacy benefit managers to favor their brand-name products over generics—potentially at the expense of patients.

Such deals, which are largely hidden from public view, don’t lower the actual list price of the drug, according to an article from ProPublica and The New York Times. Instead, drug companies offer rebates to payers so that they give brand-name drugs preferential treatment in their coverage decisions.

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There are signs that the practice is becoming more common. Recent examples of brand-name drugs that payers have insisted on include cholesterol treatment Zetia, stroke-prevention drug Aggrenox, pain-relieving gel Voltaren and a dozen others. And for drug company Shire, brokering deals with payers is just the latest in a series of moves it's taken to hold onto market share for its attention-deficit drug Adderall XR.

“You definitely see a much more aggressive posture than you used to see,” said Christine Baeder, senior vice president for customer and marketing operations at Teva, the world’s largest generic drug manufacturer.

Yet Teva itself has done something similar. Copaxone, one of the brand-name drugs the company manufactures, appears on a list of 12 drugs for which CVS Caremark has told pharmacies its Medicare prescription drug plans will not cover the generic version.

Some insurers don’t charge consumers more for brand-name drugs than for generics despite requiring them to purchase the branded versions, the article noted. However, the many Americans who have high-deductible health plans can be hit hard by the price difference.

A spokesman for UnitedHealth, which continues to favor Adderall XR and certain other brand-name drugs over generics, noted that pharmacies and doctors could seek an exemption from the insurer if they want the generic instead. Still, some patients who were flummoxed by being steered toward brand-name drugs said they weren’t told about that option.

This is not the first time that the rebates negotiated between drug companies and insurers/PBMs have been scrutinized. A paper published in JAMA Internal Medicine in May found that rebates may actually drive up the amount Medicare and its beneficiaries pay for drugs. The paper’s authors recommended that to solve the problem, patients should be charged flat-dollar copays rather than coinsurance charges, which are based on a percentage of the drug’s price.