Legislation & Regulation

Should Plans Pay Physicians To Switch Patients to Generics?

The AMA calls it a kickback, but the industry sees it as just good practice to give doctors an incentive to get patients on equivalent generics

John Carroll

Are doctors who take bonuses or performance incentives from health plans for boosting their patients’ use of generic drugs breaking any laws?

The American Medical Association posted a document on its Web site challenging any use of financial incentives intended to persuade a doctor to change a patient’s prescription from a brand name to generic. “A physician accepting payment from an insurer in exchange for moving a patient from a brand name to a generic drug could potentially face both criminal and civil liability exposure under the federal antikickback statute,” the AMA said.

The AMA also highlighted some harsh penalties: five years in prison, criminal fines of up to $25,000, civil monetary penalties up to $50,000, and exclusion from participation in federal health care programs like Medicare. There are ethical issues as well. “Under no circumstances may physicians place their own financial interests above the welfare of their patients.”

For several years, health plans have saved millions by boosting the usage of generics. Prices vary, but once the active ingredient of a drug is marketed by several manufacturers, the retail price typically slides to a fraction of what it had been when the brand-name version monopolized the field. It’s not at all uncommon to offer members significantly lower copayments.

However, when Blue Care Network, an HMO owned by Blue Cross Blue Shield Michigan, offered its network physicians a chance to earn $100 in 90 days for every patient who changed from a nonformulary lipid-lowering drug to a generic one, the volume of the discussion over the appropriate use of financial incentives was turned up from coast to coast, grabbing the attention of at least one legislator, a Massachusetts man who has set out to prohibit what he sees as an abuse by managed care companies.

From Jan. 1 to March 31 last year, Blue Care Network asked physicians to “consider . . . if there were some patients who could appropriately be treated with generic lipid-lowering drugs,” says Helen Stojic, a spokeswoman for Blue Care Network. Doctors received lists of patients taking nonformulary brand-name lipid-lowering drugs, and the heath plan offered $100 for each patient who switched.


Stojic pointedly notes that the incentive program paid the physician to review the patient, and that the program was voluntary. “We have all sorts of people looking at our programs, including attorneys, primary care groups, and pharmacists. Everyone felt it was a program that could be beneficial.”

The only refinement the state medical society asked for was to make sure that physicians were clearly told that they were to be paid to take the time to review records and counsel patients when there was an appropriate generic drug to consider. No one has accused Blue Care of legal missteps, Stojic says.

In the first five months of 2007, the HMO saw its costs for lipid-lowering drugs plunge $5 million as the use of generic drugs rose. Members saved money as well, cutting their copayments, for example, from $40 for a brand-name drug to $10 for a generic.

“We don’t plan to repeat the program because it took advantage of a one-time circumstance — a major lipid-lowering drug coming off patent,” says Stojic. “It was a tremendous success; we got good feedback. There’s no reason to do it again, but I think we would certainly work with the medical society if there was an interest in doing another program.”

Blue Cross & Blue Shield companies are engaged in a lot of activities to get people more information on how to save money by relying more heavily on generic equivalents. Some of those programs include direct benefits to members, like waiving their copayments on generics for a period of time. Also, a variety of health plans have incentives to physicians to increase their use of generics.

Under a pilot program, for example, Excellus BlueCross BlueShield in upstate New York offered four physician groups an increased rate for some types of office visits when they increased their generic “fill” rates by 5 percent. “It’s been reviewed,” says Jim Redmond, a regional vice president for Excellus, and no one saw anything that could be construed as illegal. “It’s not targeting one specific drug; it’s the overall generic fill rate.”

Stojic said that the Blue Care Network program did not target a specific drug either; it looked at nonformulary drugs within a class of drugs called lipid-lowering.

Excellus is acutely aware of just how much money is at stake. When the osteoporosis drug Fosamax came off patent Feb. 6, for example, the health plan noted a retail price of $90 per month. A generic alternative with the same active ingredients was likely to roll out at $60 to $70 a month, said the plan, falling to $20 per month as more manufacturers piled in. If all Fosamax users were go generic in 39 upstate New York counties, they collectively save $45.

Declined to comment

The AMA declined to make any of its trustees available for an interview on the subject. Still, this issue shows no sign of going away.

Peter Koutoujian, house chairman of the Massachusetts legislature’s joint committee on public health, offered a bill last December — An Act Prohibiting Drug Switching Payments — that would make it “illegal for insurance carriers’ contracts to include a specific payment to the participating provider as an inducement to change a prescription for a drug or medical product from one specific drug or medical product to another.”

He was aiming a haymaker right at the chops of the managed care industry.

“Patients should feel confident they are being prescribed the most effective medication based on their doctors’ best judgment,” said Koutoujian at the time he proposed the legislation. “It’s inappropriate for insurers to hold payments over doctors’ heads in a blatant attempt to influence prescribing decisions. Doctors should be free to make medical decisions based on what is best for their patient as opposed to what is best for some big business.”

One more thing

However, pharmaceutical directors have another ethical question to pose: Isn’t a greater reliance on appropriate generics good for plan members as well as insurers?

“I know that managed care organizations have over the years paid bonuses to physicians or shared dollars with physicians on prescription drug benefits,” says Marissa Schlaifer, director of pharmacy affairs for the Academy of Managed Care Pharmacy. She says it is important to remember that when a patient switches to an equivalent generic, the money he saves directly is good for him.

Says Schlaifer: “What’s best for the patient is to use more generics.”

When it’s appropriate.

“No plan wants a physician whose patient’s illness is controlled on one medication to change to a generic if it’s not the appropriate one,” she adds.

Otherwise, “The most expensive medication is the wrong medication.”

And as for the AMA’s objection, AHIP asked the law firm Manatt, Phelps & Phillips about it.

The firm determined that the AMA’s concerns are “overblown” and that well designed generic utilization compensation programs are consistent with the AMA Code of Medical Ethics. Because therapeutically-equivalent generic drugs aren’t approved by the FDA unless they are bioequivalent and as effective as the brand-name drugs, “Physicians who appropriately prescribe generics could not be reasonably viewed as putting their interests over the interests of their patients.”

John Carroll, a freelance writer, has been a contributing editor of MANAGED CARE for six years.


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