Medco Plans to Block Generic Lipitor

The threat of generic competition prompted Pfizer to grant discounts on Lipitor to PBMs who agree not to cover its generic equivalent.

Much has been made of the potential for generic Lipitor to slash drug costs when it enters the market later this month, but pharmacy benefit managers (PBMs) aren’t in a rush to make the switch.

In letters to pharmacists last week, PBMs instructed pharmacies to continue dispensing brand Lipitor for the next 6 months. This reversal of business as usual reflects new tactics by Pfizer to keep sales afloat as generic competition threatens its blockbuster drug. PBMs that agree to keep generic atorvastatin off their formularies will receive substantial discounts on Lipitor, courtesy of Pfizer.

So far, the drug manufacturer’s strategy is working.

Medco Health Solutions informed pharmacists that it will not cover generic Lipitor for members of Covenant Health Care, a managed care plan that contracts Medco to provide prescription drug coverage to its 1.2 million beneficiaries. Beginning December 1, 2011, claims for generic atorvastatin will reject with a secondary message of “Submit brand Lipitor,” according to the memo.

Other benefit managers followed suit, with CatalystRx and MedImpact Healthcare Systems issuing similar notices to pharmacies in their networks. In its letter, CatalystRx described the move as part of its ongoing efforts to “support continued access to affordable prescription drug benefits.”

To offset the expense of dispensing Lipitor instead of its generic equivalent, which would cost payers roughly $35 less, Pfizer is offering benefit managers a point-of-sale discount that undercuts the generic price. As a result, most patients taking Lipitor will see their copays drop to about $10 per prescription, the New York Times reported.

The block on generic Lipitor is scheduled to lift on May 31, 2012, when several other generic drug makers are expected to launch their versions of the drug.

Pharmacists push back

The letters from pharmacy benefit managers were provided to Bloomberg and the New York Times by Pharmacists United for Truth and Transparency, a newly formed pharmacists’ group that recently launched a public awareness campaign to unveil what it calls “unethical and misleading” PBM policies.

Dave Marley, RPh, founding member of the group and author of a Pharmacy Times blog about bringing accountability to the PBM industry, told NYT that employers and taxpayers will bear the brunt of excess costs under the new arrangement—even as Medco and other PBMs pocket Pfizer’s rebate dollars.

In statements and interviews, spokespeople from Medco and CatalystRx insist the plan is both legal and routine. “This is a custom plan design, which is not a new concept,” Ann Smith of Medco told Bloomberg. They view excluding generic Lipitor from their formularies in exchange for discounts from Pfizer as just another way PBMs negotiate to keep drug costs low.

Marley disagrees. “We’re talking about blocking a truly less expensive drug,” he said. “This is the most aggressive I’ve seen, where they are trusting the employer is not going to figure out the whole game.”

UPDATE: Medco responds

At 10:30 AM, November 16, a representative of Medco contacted Pharmacy Times with additional details about Lipitor coverage for members of its client health plan, Coventry Health Care.

According to Medco, “the Times story references a client-specific notice sent by Medco to retail pharmacies on behalf of a single health plan client that has chosen to work with Pfizer directly to continue using branded Lipitor rather than the generic product during the generic exclusivity period.” Medco stressed that it would not retain any rebate dollars from Pfizer.

For the remaining 99% of its other client health plans, Medco said it will not restrict retail pharmacies from dispensing generic Lipitor when Pfizer’s patent expires November 30. To keep supply stable during the transition, the benefit manager plans to use brand Lipitor as its “house generic.”

The substitution will not affect costs to patients or health plans, who will pay the same as they would for the generic drug, Medco said.

For other articles in this issue, see:

• Screening Kids for High Cholesterol
• IMS: Drug Shortages Highly Concentrated