Cheaper generic-only drug plans

A new offering for employers with steep employee drug costs.

By Walecia Konrad, FSB Magazine

(FSB Magazine) -- Small-business owners have grudgingly grown accustomed to double-digit increases in their health-care insurance premiums each year. That probably won't change radically in 2007, but one new idea promises to ease some of the burden: generic-only prescription plans. In October, Medco Health Solutions (Charts) (medcohealth.com), the giant pharmaceutical benefits manager in Franklin Lakes, N.J., known for its low-priced mail-order drug service, introduced Generics First, prescription coverage aimed at small and midsized companies.

Under the plan, employees who purchase generic medicines receive a 90-day supply for a $10 co-payment, while those purchasing brand-name drugs must pay the full cost out of pocket. Meanwhile, employers are charged just $600 to $700 a year for each employee, about half of what traditional plans cost, says John Driscoll, president of Medco's insured-markets group.

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Similarly, Wal-Mart (Charts) has announced that it will soon start selling certain generics for as little as $4 a prescription. "That supports the notion that generics are one answer to rising drug costs," says Driscoll.

Medco's plan is not the first to offer lower co-pays for generic drugs, but it is by far the most aggressive. That will probably make some employees unhappy. Under Medco's new plan, patients shoulder the cost of brand-name drugs even if they have no generic equivalent.

But Driscoll says that as more and more generics are developed, employee complaints should diminish. About $50 billion worth of pharmaceuticals is expected to go off patent by 2010. Generics already make up 50 percent of all prescriptions written, and at least 80 percent of all therapeutic drug categories have at least one generic available.

Please send feedback or column ideas to mailto:fsb_mail@timeinc.com

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.