Health plans put generics in tiers as prices rise

Faced with the rising costs of generic prescription drugs, health insurers increasingly are turning to tiers and preferred lists on their formularies to keep costs down. Those strategies previously were used only for brand-name and specialty drugs. Experts say those approaches will increase out-of-pocket costs for patients and could make them less likely to adhere to drug regimens.

Over the past year, the cost of generic drugs has skyrocketed, including for products that have been on the market for years. A study by Pembroke Consulting found that half of the generic drugs listed rose in price between July 2013 and July 2014, with a median increase of nearly 12%. Some drug prices saw extreme increases. The price for a 500mg capsule of tetracycline, a common antibiotic, soared from 5 cents to $8.59.

Experts say a combination of lack of government oversight over generic pricing, manufacturers exiting the generic market, and shortages of active ingredients have contributed to the increases. This month, Rep. Elijah Cummings (DMd.) and Sen. Bernie Sanders (I-Vt.) sent letters to 14 generic-drug makers seeking explanations for price increases.

For many health plans, the solution has been to create tiers and preferred lists, requiring members to pay higher copayments for drugs that are not on low-tier or preferred lists.

Minnesota-based HealthPartners Plans said it intends to introduce tiered generic lists in its commercial and exchange plans in January, a spokesman said.

The 80,000-member Group Health Cooperative of South Central Wisconsin no longer defines tiers in terms of generics and brands. While most generics remain in the lowest-cost tier, the insurer has moved more expensive generics up to tier 2 and has shifted some preferred brand-name drugs down to tier 1.

In a written statement, the Generic Pharmaceutical Association said “the generic industry is unrivaled in its commitment to provide access to lower-cost drugs for patients.”