A case study in generic drug use: should there be risk adjustment in incentive payments for the use of generic medications?

BACKGROUND

Encouraging generic drug use has reduced health care costs for payers and consumers, but the availability of therapeutically interchangeable medications or generic medications of choice is not equal across disease states. The extent to which systems of care are able to substitute with generics is not well understood.

OBJECTIVES

To (a) define and measure the maximum generic rate (MGR) of currently prescribed drugs within an academic medical group in and (b) illustrate differences across drugs associated with selected underlying diseases.

METHODS

Prescription claims data were examined from an academic medical group in Chicago, Illinois. Based on pharmacologic and therapeutic criteria, drugs were classified into 2 categories-potentially substitutable and not potentially substitutable-based on whether the drugs are branded forms of the same chemical entities that are available as generics or are therapeutically interchangeable with other medications that have different chemical compositions but the same mechanisms of action and potential efficacy. A medication was considered potentially substitutable if it (a) did not have a narrow therapeutic index as defined by the FDA; (b) did not belong to 1 of 6 protected classes of drugs in the Medicare D provisions; (c) was substitutable with a generic medication containing the same chemical entity; or (d) was therapeutically interchangeable with a therapeutically equivalent medication. MGR was defined as the percentage of prescriptions that could potentially be prescribed in generic form. This rate was examined overall and across drugs known to be associated with illustrative diseases including hypertension, diabetes mellitus, and obstructive lung diseases.

RESULTS

The MGR ranged from 100% for drugs used in hypertension to 26.7% for drugs used in obstructive lung diseases. The MGR was 83.6%.

CONCLUSIONS

Payers wishing to promote generic substitution should incorporate the potential for substitution of clinically appropriate generic medications as part of incentives for generic utilization to avoid unintended consequences of using a fixed target rate. A practical methodology for determining an MGR is offered.