BCBS Tackles Outpatient Generic Medication Spending, Access

January 28, 2020 - Eighteen Blue Cross Blue Shield Association companies will be forming a subsidiary to handle high outpatient generic medication spending and combat drug shortages, announced Blue Cross Blue Shield Association.

The companies are partnering with the non-profit generic pharmaceutical manufacturer, Civica Rx. The pharmaceutical company originally formed on the principle of lowering generic drug costs. Allegheny Health Network, a Highmark health system, was among its founders.

“We believe everyone should have access to health care, no matter who they are or where they live,” said Scott P. Serota, president and chief executive officer of BCBSA.

“Through this partnership, we will push toward the vital objective of providing greater access to much-needed medications.  As BCBS companies and Civica embark on this important work, we hope others will join us to achieve the change Americans want to see in the health care system.”

The subsidiary is open to bringing on more partners, including additional payers, employers, and pharmacies, according to Blue Cross Blue Shield Association’s website.

Blue Cross Blue Shield Association has promised $55 million to the subsidiary to lower prices for select generics. Blue Cross Blue Shield Association and Civica Rx will secure Abbreviated New Drug Applications to produce these drugs. The entities will receive aggregated volume and multiyear purchasing commitments.

“Drugs are too expensive for the wrong reasons. They’re not too expensive because of innovation. They’re too expensive because sometimes there isn’t enough competition,” Paul Markovich, president and chief executive officer of Blue Shield of California, said in a statement on the site.

“We plan to introduce competitive alternatives to the marketplace to ensure we have affordable drugs available to our members. This is not happening naturally now. Anytime, anywhere a drug is off patent, it’s an opportunity for us to create an alternative and ensure that consumers are not only getting high-quality drugs, but they’re affordable.”

Identifying which generics can produce the most cost savings is one of the criterion for selecting which drugs to fund. Blue Cross Blue Shield Association has not yet specified which drugs they will be offering at lower cost through the Civica Rx partnership. They have indicated, however, that the final list of generics will serve a variety of conditions.

The fact that Civica Rx is a nonprofit organization could be key to this process. It should enable the payer to directly pass on savings to consumers.

“We’re disrupting traditional for profit manufacturing to ensure patients have access to safe, effective generic prescriptions at an affordable price,” the site explained.

Drug prices are high and only rising, expected to increase by 3.8 percent this year.

Prescription drug spending is driving the escalating medical cost trend and overall healthcare spending.

Generics are not shielded from this trend, even though their purpose is to be more cost-effective than brand name medications.

In fact, in 2019, a Health Affairs study found that Medicare out-of-pocket healthcare spending was higher for some generic drugs compared to their brand name counterparts. The study’s lead author stated that it may prove more cost-effective for Medicare beneficiaries to purchase brand-name drugs instead of generics. The irony was not lost on the study’s researchers.

Although they can prove costly, generics still serve a critical purpose.

First generic drugs could save more than $4 billion per year, the Association for Accessible Medicine discovered last year. These first generic versions of a brand-name drug can set the pace for lowering the competition’s prices if the first generic represents a significant decrease from its brand name’s expensive price tag.

Through their partnership with Civica Rx and other healthcare entities, Blue Cross Blue Shield Association aims to combat the trend of high generics prices to increase access to care based on affordability.

Members will have access to these lower cost generics early on in 2022, the companies anticipate.