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DRUG PRICE INCREASES ACCOUNT FOR ALMOST TWO-THIRDS OF MICHIGAN BLUES Rx PROGRAM COST INCREASE IN 1984, CONSULTANT TELLS WAXMAN SUBCMTE.

Executive Summary

Drug price increases accounted for about two-thirds of the total cost rise of the Michigan Blue Cross and Blue Shield Rx drug program in 1984 compared to the previous year, Pharmaceutical Consultant William Lewis said July 15 at Rep. Waxman's (D-Calif.) House Energy & Commerce$/ Health Subcmte. hearing on drug prices. Lewis said: "Last year, 1984, we paid for 23,233,513 prescriptions worth approximately $243.5 mil. This represents a 14.9% increase in cost per capita over the previous year. The 14.9% figure broken down is a 9.2% increase in the average cost per prescription and a 5.2% increase in the number of prescriptions per person." Noting that for the period July 1, 1984 to July 1, 1985, "the average increase in price for the top 50 drug products dispensed in our program was 10.9%," Lewis said that generic drug use helped restrain increases in the Rx program costs. "The difference between this figure [average drug price increase] and the 9.2% increase, the average cost per prescription, is at least partially due to our efforts to encourage the use of less expensive generic equivalents," he said. While the average price increase of the 50 most dispensed products under the Michigan Blue Cross and Blue Shield program increased by over 10%, the effects of generic competition on prices can also be seen. Of the 50 listed products, 15 -- most off patent -- showed less than 5% price increases during the survey period. For example, Upjohn's Motrin -- - now off patent and already faced with competition from OTC versions of ibuprofen -- - did not increase in price during the 12 month period, Michigan Blue Cross and Blue Shield data show. Pfizer's Diabenese, did not go up in price in face of generic chlorpropamide competition. The price stability shown by those 15 products was offset, however, by steep price increases on other top sellers. For example, six products increased in price by more than 20% during the 12 month period. SmithKline's Dyazide and Merck's Inderal, both of which are now off patent and facing generic competition, rose 26% in price during the period. Just behind those two, Pfizer's Feldene, which under the patent restoration/ANDA law gets a 10 year exclusive marketing period, increased 25.4% from July 1984 to July 1985, according to Michigan Blue Cross and Blue Shield data submitted to the subcmte. Lewis noted that Michigan Blue Cross and Blue Shield began a maximum allowable cost program in 1982 based on the federal MAC system. "Because of the success of our initial efforts with a [MAC] program and the fact that [HHS] has not added any drugs to its MAC listing since 1982, we have just begun expanding the MAC program on our own, with the addition of 55 drug products. The addition of these drugs promises to produce an additional savings of $10.5 mil. when implemented for all groups." Because the Michigan Blue Cross/Blue Shield Rx drug program costs "are increasing at a rate of nearly four times that of hospitalization and over 6-1/2 times that of physician care," Lewis said that other steps to reduce expenditures are being considered. "In addition to urging pharmaceutical mfrs. to be more responsive to consumer concerns over rapidly increasing prices," Lewis said that his group is looking at "restrictive drug formularies and on-line interactive computerized drug utilization review." Michigan Blue Cross and Blue Shield efforts to reduce Rx program costs date back to 1977 when the health insurer implemented an "incentive reimbursement plan. This program produced savings of approximately $3.67 mil. of which 70% could be attributed to generic drugs," Lewis said. Modifications to the program in 1983 have increased the utilization of generics, Lewis said, so that now "the level of generic utilization in Michigan is 2-1/4 times greater than the national average." Michigan Blue Cross and Blue Shield "began implementing, on a selective basis, in 1982, a MAC program for groups," Lewis said, adding that when implemented for all groups, savings of approximately $3.1 mil. annually are expected. Lewis noted that "at this time, Blue Cross and Blue Shield of Michigan administers one of the largest prescription drug programs of its kind in the United States with approximately 3.1 mil. members." He added that pharmacies participating in the Michigan Blue Cross and Blue Shield drug program currently is about 98% of all those in Michigan. Chart omitted.

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