Plan Could Make Generic Drugs Even Cheaper

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Plan Could Make Generic Drugs Even Cheaper
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Cost Breaks on Generic Drugs

• TRENTON, N.J. -- Consumers are suddenly getting a
  break on the cost of generic drugs as discount
  retailers and some prescription benefit managers
  start programs that provide a host of popular
  medications at very low costs.
• In the last month, Wal-Mart stores Inc. and
  Target Corp. have begun programs at pharmacies in
  their Florida stores, including Wal-Mart's Sam's
  Club, offering dozens of generic drugs for 4.
  Last May, Kmart Holding Corp.'s 1,100 stores
  began offering generics for 15 for a 90-day
  supply.
• On Thursday, Medco Health Solutions, one of the
  largest U.S. prescription benefit managers,
  announced a plan targeting consumers indirectly
  through small- and medium-sized businesses
  struggling to offer employees

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Focusing on smaller employers

• Medco will offer its Generics First plan through
  partner health insurers for which it manages
  prescription claims and shipments from its mail
  order pharmacies. The plan kicks off this week
  through the first insurer to sign up, Nationwide
  Life Insurance Co., said John Driscoll, Medco's
  group president for new business development.
• "While many of the companies we're targeting have
  little or no insurance plan today, they want it
  or may have had it in the past," Driscoll said.
  "The biggest and fastest-growing need in the
  marketplace is for some sort of low-cost
  prescription plan."
• Medco's insurance partners will market the plan
  through their agents to companies with up to
  about 500 workers.
• Driscoll said the employers will get Generics
  First at about half the monthly premium cost for
  a traditional prescription plan, and their
  employees will get generic drugs for as little as
  10 for a 90-day supply via mail order. The Medco
  plan covers 818 different medications, more than
  three times the number offered at Wal-Mart, and
  offers discounts on brand-name drugs and use of
  about 55,000 drug stores.

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Economics 1 Pooling

• Insurance pooling One of the reasons that large
  firms often get good health insurance benefits is
  because they have good experience ratings.
• Also, big firms allow the Law of Large Numbers
  to kick in. Small firms dont have that.
• Question How large is large?

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Economics 2 Segmented Demand
Price

• Brand name sellers get those customers who value
  the drug the most

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• Those who would buy generics, have more elastic
  demand. Pay less.

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