The “Patent Cliff” and its Effects upon Workers’ Compensation Claims

Within the healthcare industry, there is a great deal of discussion regarding the occurrence of a “patent cliff.” In 2013, several brand name drugs’ patents will expire which will result in the release of their generic equivalents to the market.  Generic drugs are less expensive versions of brand name drugs that contain the same active ingredients as their branded counterparts offering equivalent usage, safety and efficacy at a typically lower cost. It has been noted that approximately 80% of a brand name drug’s sales volume is replaced by its generic counterpart within six months of its patent expiration. As a result, pharmaceutical companies have applied the term “patent cliff” to the unusual large number of drugs going off patent in the next few years and the reduction of revenue they will experience due to the loss of major brand name drug patents.    

As prices continue to rise in the area of pain management, it is important to look for cost savings, especially in the area of prescription medications.  One such opportunity is when a brand medication goes off patent.  When the generic formulation is approved to be released on the market, a cost savings can be realized anywhere from 20% to as much as 90% over time as competition between manufacturers supplying the generic increases. 

We saw this in 2012 with the release of generic Kadian (Morphine Sulfate CER), with a reduction in cost from $9.73 per capsule for brand (Kadian CER 30mg) to $5.46 per capsule for the generic medication of the same dosage. The same was true for generic Lexapro 20mg (Escitalopram Oxalate) at a cost per tablet of $3.72 versus $5.46 for brand (Lexapro 20mg). In 2013, there are several frequently prescribed brand name drugs whose patents will expire.  Of these drugs, the most highly utilized within the workers’ compensation industry include Opana ER and Oxycontin (both are long acting opioid medications utilized for the treatment of chronic pain), Cymbalta (frequently prescribed for chronic musculoskeletal pain and depression) and topical Lidoderm patches (most often used off-label for treatment of neuropathic pain other than diabetic neuropathy).   All were listed in the top 20 medications by spend and transactions in the PMSI 2012 Annual Drug Trends Report for Workers’ Compensation.  

The following prescriptions should be watched:

Opana ER– In mid December 2012, the FDA approved the generic formulation of brand Opana ER (Oxymorphone Hydrochloride TER) to be released as well as approving the new tamper resistant product, which will not have a generic equivalent at this time.  The first generic Opana ER products were released in early January 2013 with savings of almost a dollar per pill.  Generic Oxymorphone HCL TER 15mg costs $5.17 per tablet versus $6.07 for brand Opana ER 15mg.  For an injured worker taking 60 pills per month with a life expectancy of 25 years that amounts to a lifetime savings of $16,200.

Oxycontin– Purdue, the manufacturer of brand Oxycontin, has for years successfully blocked release of generic equivalent products through litigation. The patent for the original formulation of Oxycontin is set to expire on April 16, 2013.However,  Purdue has  begun studies to test Oxycontin’s use for pain in children which could help them secure a six month extension for the drug’s original patent.  At this time the extension is still pending approval by the FDA.  Purdue has also reformulated the original Oxycontin to create a more tamper resistant product and is arguing that the generic formulations should be required to adhere to the newer, more tamper resistant formulation guidelines to reduce their potential for abuse.  If the FDA agrees, then the generic formulations could not be released until the patent for the new formulation of Oxycontin is set to expire in 2025.   Oxycontin was listed as #1 and #3 in total spend and transactions respectively in the PMSI 2012 Drug Trends Report for workers’ compensation. Therefore, the availability of a generic product would yield meaningful savings on claims where it is being prescribed.

Cymbalta– Cymbalta, whose patent was set to expire in June of 2013, was just awarded a patent extension of 6 months due to the FDA’s pediatric-exclusivity program for its studies testing use of Cymbalta in children and adolescents.  Therefore, it is difficult to predict exactly when this drug will come off patent.

Lidoderm patches-Watson Pharmaceuticals received final approval by the FDA for its generic version of Lidoderm and was given 180 days of marketing exclusivity pursuant to an agreement with the manufacturer of the brand name product on May 29, 2012.    The generic product is set to be released in September of 2013 when brand Lidoderm’s patent is set to expire. Even though topical Lidoderm patches are most often prescribed off-label to treat neuropathic pain in workers’ compensation injuries and therefore does not impact MSAs, it does have an impact on the ever rising pharmacy costs of the claim itself.  It was listed #2 behind Oxycontin in the top 20 medications of total spend in the PMSI 2012 Annual Drug Trends Report for Workers’ Compensation. 

As healthcare expenditures continue to climb within the workers’ compensation industry, particularly in the area of prescription medications, generics can play a key role in helping to lower costs.  It is important for the workers’ compensation industry to stay abreast of patent expirations and leverage this information for overall claim savings as well as MSA savings.  PMSI’s PBM has numerous programs that have driven high levels of generic utilization for our clients.  These programs have produced significant savings and helped clients lower both claims costs and MSA allocations.

1 thought on “The “Patent Cliff” and its Effects upon Workers’ Compensation Claims”

  1. The price of Lexapro has not dropped much as a generic. Not enough companies are getting on board to make it to produce real competition in prices – in particular, I don’t think Ranbaxy is interested.

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