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GENERIC DRUGS: OPTIMIZING THE FUTURE
REAPING THE FULL BENEFITS OF GENERIC UTILIZATION
CHALLENGE
In 2011, products with sales of more than
$30 billion face generic competition as
many major brand name drugs lose market
exclusivity. However, the industry will face
the full impact of patients shifting to lowercost generics, as well as other brands in
their therapy classes, in 2012. This is due
to the timing and expected competitive
intensity among generic entrants. As
depicted in the following table, increased
use of generics is projected to continue
in the coming years, as more blockbuster
products lose patent protection.
Given where the prescription market
is moving, it is very achievable for plan
sponsors to realize excellent generic drug
utilization and aggressive price discounts
on generic products.
One point is clear: Plan sponsors have never been in a better position to reap the benefits of increased
generic performance.
Navitus employs lowest-net-cost, full pass-through pricing strategies that ensure Navitus clients reap the
full benefit of lower-cost drugs. These strategies include the implementation of consistent generic pricing
across all pharmacy channels, formulary management that emphasizes products that provide the best
overall value, and innovative rebate contracting—including a post-patent contract strategy that ensures
plan sponsors always have access to the lowest-net-cost product.
“Release of generics is a test of a true pass-through PBM. When traditional PBMs experience
the release of generics, their revenue goes up and their shareholders are happy. When Navitus
experiences the release of generics, our revenue isn’t affected…our clients simply experience
tremendous savings.”
- Terry Seligman, Navitus President & CEO
2601 West Beltline Highway, Suite 600 | Madison, Wisconsin 53713 | 877.571.7500 toll free | www.navitus.com
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THE NAVITUS LOWEST-NET-COST PRICING STRATEGY
Our pricing strategy ensures that plan sponsors benefit immediately from all upside performance of
drug discounts and negotiated pricing improvements as they become available over the entire contract
term—as opposed to other PBM pricing models that consider static guarantees the contract ceiling.
Plan sponsors are able to take advantage of lower discounts as soon as they become available, which
allows them to save more than if the discounts were capped by minimum guarantees. Being able to
take advantage of the lower discounts immediately will be more and more important as more drugs lose
patents.
THE NAVITUS SELECT FORMULARY
Our most popular formulary product, Navitus Select, also promotes lowest-net-cost and generic
alternatives. Navitus Select is a highly managed, closed formulary that can be administered with either
a two-tier or three-tier (preferred) plan design. This formulary utilizes a high level of management tools,
including prior authorization, step therapy, and quantity limits. The formulary provides adequate options
for members and has proven effective in controlling costs.
THE NAVITUS POST-PATENT STRATEGY
When a product loses patent protection and a generic version becomes available, the most common
scenario is for the price of the generic to drop rapidly due to competition from multiple manufacturers.
In this case, Navitus immediately takes advantage of the product’s lower cost and passes it on to plan
sponsors.
But these post patent generics do not always immediately price like generics – sometimes they are priced
like brand name drugs for six months, or more, because of a limited number of generic competitors. In
those cases, the resulting price of the generic may be more than the net cost of the brand.
As such, Navitus employs a unique contracting strategy that ensures the plan sponsor always pays the
lowest net cost of the product.
• The lowest-net-cost version of the product is taken into account when determining the formulary tier
of the drug.
• When the generic again yields a lower-net cost (usually after the first six months), we add the generic
to the formulary and the brand is removed.
• This approach allows plan sponsors to pay for the products with the lowest net cost and allows the
member to pay a generic copay.
• Each situation is reviewed separately and we work with its plan sponsors to ensure a lowest-net-cost
approach.
2601 West Beltline Highway, Suite 600 | Madison, Wisconsin 53713 | 877.571.7500 toll free | www.navitus.com
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This strategy contrasts sharply with exclusivity period management employed by other PBM models,
particularly where they take spread on every prescription. In the spread model, typically, the PBM simply
moves the drug to Tier 1 when it reaches generic status – despite the exclusivity period and the fact that
generics can be more expensive for six months or more.
With Navitus, each generic is evaluated on a case-by-case basis, and lowest net cost is considered
and maintained at all times. With so many drugs going off patent in the coming years, our post-patent
strategy ensures significant and continued plan sponsor savings.
RESULTS
Navitus’ burgeoning book of business
generic utilization rate confirms the
success of its lowest-net-cost and generic
drug promotion strategies. The proof is
also evident when comparing our book
of business generic drug utilization rates
with the performance of other PBM
models. We consistently outperform the
book-of-business generic drug utilization
trend of larger, traditional model PBMs,
as published in their annual trend reports
and depicted in the graph.
New plan sponsors experience significant generic utilization spikes, with their move to Navitus, and enjoy
year-over-year generic utilization performance improvement. Many have high praises for our strategies
and for reaping the full benefits of generic utilization:
“Johnsonville Sausage’s generic utilization rose from 67.38% in 2009 to 74.60% in 2011 — a
jump of over 7 percentage points! We attribute this remarkable outcome to our collaboration
with Navitus and our transition to the Navitus Select Formulary in 2010. We’re very pleased with
Navitus’ service thus far, and its ability to garner savings for our plan through promoting generics.”
- Julie Herschleb
Director of Total Awards
Johnsonville Sausage
2601 West Beltline Highway, Suite 600 | Madison, Wisconsin 53713 | 877.571.7500 toll free | www.navitus.com