Transcript Generic_Competition

Plan Could Make Generic
Drugs Even Cheaper
http://www.clickondetroit.com/health/10070636/detail.html
Cost Breaks on Generic Drugs
• TRENTON, N.J. -- Consumers are suddenly getting a
break on the cost of generic drugs as discount
retailers and some prescription benefit managers
start programs that provide a host of popular
medications at very low costs.
• In the last month, Wal-Mart stores Inc. and Target
Corp. have begun programs at pharmacies in their
Florida stores, including Wal-Mart's Sam's Club,
offering dozens of generic drugs for $4. Last May,
Kmart Holding Corp.'s 1,100 stores began offering
generics for $15 for a 90-day supply.
• On Thursday, Medco Health Solutions, one of the
largest U.S. prescription benefit managers,
announced a plan targeting consumers indirectly
through small- and medium-sized businesses
struggling to offer employees
Focusing on smaller employers
• Medco will offer its Generics First plan through partner health
insurers for which it manages prescription claims and
shipments from its mail order pharmacies. The plan kicks off
this week through the first insurer to sign up, Nationwide Life
Insurance Co., said John Driscoll, Medco's group president for
new business development.
• "While many of the companies we're targeting have little or no
insurance plan today, they want it or may have had it in the
past," Driscoll said. "The biggest and fastest-growing need in
the marketplace is for some sort of low-cost prescription plan."
• Medco's insurance partners will market the plan through their
agents to companies with up to about 500 workers.
• Driscoll said the employers will get Generics First at about half
the monthly premium cost for a traditional prescription plan,
and their employees will get generic drugs for as little as $10
for a 90-day supply via mail order. The Medco plan covers 818
different medications, more than three times the number
offered at Wal-Mart, and offers discounts on brand-name drugs
and use of about 55,000 drug stores.
Economics – 1 – Pooling
• Insurance pooling – One of the reasons
that large firms often get good health
insurance benefits is because they
have good experience ratings.
• Also, big firms allow the “Law of Large
Numbers” to kick in. Small firms don’t
have that.
• Question: How large is large?
Economics – 2 – Segmented Demand
• Brand name sellers
get those
customers who
value the drug the
“most”
Price
D
PB
PG
• Those who would
buy generics, have
more elastic
demand. Pay less.
MC
QB
MR
QG
MR’
Quantity