Out-of-pocket costs vary widely for branded, generic drugs

NEW YORK —The often wide gap between what consumers will pay out of pocket for a branded versus a generic drug is one big factor driving the continually rising demand curve for me-too medicines.

That difference in price has narrowed in recent years as generic-only me-too drug makers — and the many brand-name drug companies that have moved into the lower end of the prescription price spectrum by buying up or launching their own generic drug companies — become more sophisticated and selective about their pricing strategies. But the differences in many cases still are substantial.

In turn, that often translates to substantially lower out-of-pocket costs for health plan beneficiaries who choose the generic over the brand, when available. And, as shown in the chart compiled by SDI Health below, the differences in costs paid directly by patients for branded and me-too medications can range from a few dollars to a fraction of the cost of an original drug.

Average out-of-pocket costs for branded and generic products by therapeutic category*

Consider the market for gastrointestinal medicines. On average, according to SDI, patients paid $10 out of pocket for the generic version of a substitutable GI drug at the pharmacy, versus more than $60 for the branded drug. For diabetes medicines, the average was $39.04 for the branded version and $8.81 for the generic. On the other hand, the spread in out-of-pocket costs for consumers was much narrower for oral contraceptives: patients paid an average of $23.02 for the brand name and $15.84 for the alternative.

The two charts at the bottom of page 34 — and the chart at lower right on page 40 — track two significant pricing benchmarks consumers deal with routinely at the pharmacy counter. Both sets of numbers shine a light on the forces propelling generic utilization and prescription substitutions, as both managed care plans and their patients search aggressively for ways to save money.

2010 out-of-pocket costs for overactive bladder treatments

Using as an example the market for prescription products to treat depression, SDI Health drilled deeply into pharmacy dispensing and sales data, and applied sophisticated analytics to arrive at two key data points for each drug used to treat the condition. The result: a set of findings on the “ouch” point for each of those drugs — the average limit to what a consumer will pay for his or her prescription — and the average amount he or she saved by seeking a generic or therapeutically substitutable alternative.

Thus, the chart on the left shows the average price point for each drug at which the patient will “reverse” the prescription (i.e., refuse to have it filled because of its cost), noted Tim McGee, associate director of client solutions and syndicated analytics for SDI. The chart on the right shows the average out-of-pocket cost paid by patients for a generically or therapeutically equivalent product, after the patient has rejected the original brand-name script and gone back to his or her doctor for a new, lower-price alternative, McGee explained.

As shown, the difference in price can be substantial.

2010 out-of-pocket costs for depression treatments