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Prescribing of Generic Drugs Goes Up When Sales Visits Go Down

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Many factors influence whether physicians prescribe brand name or generic drugs

High prices for prescription drugs are the focus of several bills that are currently working their way through Congress, including bills designed to streamline the generic drug approval process and one that offers incentives for companies that want to make generic alternatives for drugs that have little or no competition.

Another bill, introduced by Senator John McCain (R-AZ) would require pharmaceutical companies to provide notice and justification when they raise their prices beyond a threshold amount. Major pharmaceutical manufacturers oppose this bill. A proposal to allow Americans to import cheaper drugs is also opposed by the pharmaceutical industry and several recent FDA commissioners, allegedly because of fears of importing unsafe drugs.

The takeaway from these and other activities on Capitol Hill is that greater transparency in drug pricing is an issue that enjoys bipartisan support. Recently too, a study by CVS Health and the Association for Accessible Medicines (AAM) has pointed out that pharmaceutical sales practices have an impact on generic prescribing habits of physicians.

People Forego Medications That Are Too Expensive

First, however, a 2016 study by Harris Poll on behalf of the Physicians Foundation found that although the overwhelming majority of respondents were happy with their primary care physician, 27 percent of patients reported having avoided filling a prescription due to the expense.

When asked about specific cost drivers of high healthcare costs, 59 percent of surveyed patients cited prescription drug costs. Yet generic alternatives are available for many brand name prescription drugs, and the use of generic drugs already results in annual savings of over $200 billion. The CVS Health / AAM study referenced above may have identified one way patients are exposed to higher drug costs than necessary in a statistically significant number of cases.

What the CVS Health / AAM Study Found

The study found that when doctors receive fewer “detailing” visits by pharmaceutical company representatives, they prescribe fewer brand name drugs and more generic drugs. Specifically, detailing policies that restricted detailing visits resulted in a 1.67 percent decrease in the market share of branded (detailed) drugs and an increase in market share of generic (nondetailed) drugs by 0.84 percent. While it may not appear to be that big a difference, overuse of brand name medications resulted in $73 billion in increased healthcare costs in the US between 2010 and 2012, and around one-third of these costs came directly from patients’ pockets.

Consumers pay a significant chunk of the cost of name brand medications out of pocket

Counterpoint: Benefits of Pharmaceutical Detailing

This is not to say that the practice of detailing drugs by pharmaceutical company representatives is bad and should be eliminated. There are advantages to the detailing process, with the main one being speed of access to clinical trial information. It can take nearly a decade for evidence from clinical research, reviews, and even textbooks to be widely accepted and adopted in the medical community, and pharmaceutical detailing visits can accelerate dissemination of new clinical knowledge. Because major pharmaceutical manufacturers have the resources to share results of new research, they undoubtedly help bring innovative therapies into the mainstream.

Detailing Visits Were Restricted, Not Prohibited

It is also important to note that the facilities in the CVS Health / AAM study that had policies restricting pharmaceutical detailing visits did not prohibit such visits, but restricted them. For example, some of the policies continued to allow detailing visits, but did away with other practices like sales reps providing lunches or other gifts to physicians while detailing their products. In other words, the restrictions on detailing were not draconian, but they still had an effect on physician prescribing habits. Restrictions did not always result in changes to prescribing habits. That was the case at Stanford University, which was one of the first adopters of restrictions on pharmaceutical detailing practices.

Potential Financial Impact on Investors

While the study does not prove a causal link between detailing policies and prescribing habits, it certainly suggests one. It could ultimately have an effect on the choices made by investors. Not all generic pharmaceutical companies are publicly traded, but several are, with many having extensive portfolios of generic drugs. Exclusivity windows, of course, keep generic alternatives at bay until patents expire, but investors who closely follow patent status on name brand drugs may have an edge over investors who do not.

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