'Branded Generics' Are Part of Confusion

Susan Hayes, president of consulting and auditing firm Pharmacy Outcomes Specialists, says she sees the alleged tactic centering on "branded generics." These products are branded drugs that are so cheap they are considered the generic of themselves, she says in an interview with DBN. This category of drug can account for up to 10% of overall drug utilization, she adds.

Branded generic products include the antibiotic Amoxil (amoxicillin), a drug that has been available for decades, Hayes explains. "There is really very little cost difference between Amoxil and amoxicillin," she says. "People just buy the brand, and there is very little generic utilization. They call the brand a generic."

A PBM trying to achieve an overall generic fill-rate guarantee might call Amoxil a generic, she says. "But if you want to price it and make the most profit, you'd want to call it a brand, because you get AWP minus 15% off of a brand." The same-priced amoxicillin, however, may appear on a PBM's MAC list, which could be sold to the payer at a discount of AWP minus 65%, she says.

By calling the product both a generic and a brand, the PBM is able to report that it dispensed a generic while charging a brand drug's 15% discount, Hayes says. "Although what [the PBM] should have done is give you the MAC price off of the generic equivalent. So [it's] running up your costs," she says as an example.

Such a tactic can boost a PBM's generic fill rate to 60% and more, which is a strong selling point for a PBM, Hayes says. "What they don't tell you is that all of these branded generics - that are a lot cheaper — are going to the fill rate, and they're really brand drugs. And [the PBM] is really charging you AWP minus 15%, and not the generic MAC price."

Helen Sherman, Pharm.D., director of pharmacy services at The Regence Group, which operates Blue Cross and Blue Shield plans in the Northwest, says that one of her biggest concerns is how miscategorizing drugs can be used by PBMs to inflate generic fill rates. "As PBMs compete, there is a multitude of ways that data can be manipulated to look favorable on a generic rate," she tells DBN.

"Our approach is that we report our generic fill rate according to how the medication was paid," Sherman says. "So if it was paid as a generic, it counts in the generic bucket, and if it was paid as brand, it was counted as a brand."

As a starting point, Regence uses drug pricing information supplied by First DataBank to categorize a product as a generic or a brand. First DataBank, however, does not specifically define a product as such, and some critics contend PBMs can easily manipulate and miscategorize drugs to suit their purposes.

Sherman says that Regence reviews drug products on a monthly basis, and will occasionally override First DataBank. This can happen when Regence doesn't feel that First DataBank's categorization aligns with how a pharmacy views the product, she adds. As such, Regence's policy on generic/brand categorization is designed to reflect the FDA's definitions. The insurer says it will classify a drug as "generic" when any one of the following are met:

The product's label name is the same as the generic name;

The product IS NOT designated as an "innovator product" by a drug data source;

The FDA approved the product under an Abbreviated New Drug Application (ANDA), and no New Drug Application (NDA) is on file;

• The product is designated as a generic in the FDA's Orange Book, which lists patents on drugs;
• The product was approved by the FDA as a generic according to information obtained via the Freedom of Information Act; or
• Other information from the FDA indicates the product is a generic.