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MARKETWATCHListening To Generic Prozac: Winners, Losers, And Sideliners
This study tracks the diffusion of generic fluoxetine after its release in August 2001 within the largest U.S. pharmacy benefit manager (PBM). Within two weeks of the generic’s release, prescriptions exceeded those of brand-name Prozac. The main winners proved to be Barr Laboratories, the first entrant to the generic market; large purchasers, who reaped substantial cost savings after Barr’s period of exclusivity expired; and the PBM. The major loser was Eli Lilly, the manufacturer of Prozac. Consumers and makers of other antidepressants largely remained on the sidelines, with surprisingly little short-term impact evident from Prozac’s patent expiration.
The release of generic fluoxetine in August 2001 marked the beginning of the largest patent expiration cycle in the history of the pharmaceutical industry.1 With annual U.S. retail sales of $2.7 billion, Prozac had been the top-selling antidepressant medication and the fifth most commonly prescribed drug in the United States.2 The introduction of generic fluoxetine occurred against the backdrop of a changing pharmaceutical market. The 1990s saw both the growth of third-party drug coverage and the rapid proliferation of pharmacy benefit managers (PBMs), which administer those benefits.3 Between 1990 and 2000, the proportion of dollars that consumers paid out of pocket for prescriptions dropped from 59 percent to 32 percent, while the proportion managed by PBMs rose from 28 percent to 72 percent.4 It has been argued that this change fundamentally altered the dynamics of the drug market, reducing costs for consumers, choices for physicians, and leverage for manufacturers and retail pharmacies, who must agree to deep discounts to do business with PBMs.5 This study tracks the diffusion of generic fluoxetine after its introduction in the largest U.S. PBM. Our objective is to convey, from a diverse set of perspectives, how generic products are adopted in the current managed pharmaceutical care market and who stands to gain and lose in the process.
At the time of the study, AdvancePCS was the largest U.S. PBM.6 Each year it served more than 75 million members, processed more than 450 million pharmacy claims, and managed more than $18 billion in drug costs, representing approximately 39 percent of the total PBM market in terms of covered lives.7 We examined new starts of and switches to fluoxetine among AdvancePCS enrollees in the twenty weeks after 2 August 2001, the release date of generic fluoxetine. Claims-level data on patient demographic characteristics, provider type, and medications (dosage, formulary status, other medication use, and costs) were summarized using unique member identifiers. Information on state generic substitution laws was obtained from the National Association of Boards of Pharmacy.8 Because meaningful discounts typically are not seen until expiration of generic exclusivity as per the Hatch-Waxman Act, cost and fluoxetine prescription data were tracked for sixteen months after the generic’s introduction.9
Prescription patterns. After the release of generic fluoxetine, there was a rapid rise in its total prescriptions as a percentage of the overall antidepressant market (Exhibit 1  ). Within two weeks, the market share of generic fluoxetine exceeded that of Prozac. Twenty weeks after its release, generic fluoxetine represented 69.6 percent of all fluoxetine prescriptions. There was a corresponding decline in prescriptions for brand-name fluoxetine (Prozac). However, the proportion of fluoxetine users in the population did not change after the introduction of the generic preparation (5.46 new fluoxetine users per 10,000 covered lives before versus 5.37 per 10,000 afterwards, Z = 0.31, p = .62). Prescriptions for other selective serotonin reuptake inhibitors (SSRIs) as a proportion of antidepressant prescriptions also stayed constant.
Predictors of new starts and switches. Among patients not previously on an antidepressant and started on fluoxetine, 65.8 percent were started on the generic medication rather than Prozac during the five months after the introduction of the generic. Among continuous fluoxetine users, 73.8 percent of those on Prozac switched to the generic during the study period.
A variety of demographic, medication, provider, cost, and regulatory factors were statistically associated with new starts of and switches to generic fluoxetine after its introduction (Exhibit 2
Although the effects of many of these variables were statistically significant, new starts of and switches to generic fluoxetine were high across all population strata. Across all of the subgroups examined, at least 64 percent were started on generic fluoxetine and more than 70 percent of those on Prozac were switched to the generic preparation. Impact on the broader antidepressant market. The release of generic fluoxetine had far less effect on the use of other SSRI antidepressants than on Prozac. After the release of generic fluoxetine, SSRIs other than Prozac (sertraline, paroxetine, citalopram, and fluvoxamine) had a statistically significant but modest increase in market share, from 54.3 percent to 55.5 percent of all antidepressant starts (Chi square = 139.3, p < .001). This increase was evident even among the subgroup of enrollees with the highest (greater than $20) cost differential between generic fluoxetine and those other SSRIs. There was almost no evidence of switching to generic fluoxetine among patients treated with medications other than Prozac. In contrast to the 74 percent rate of switching from Prozac to generic fluoxetine, only 0.9 percent of people treated other SSRIs other than Prozac switched to generic fluoxetine in the five months after it was introduced.
Generic fluoxetine costs and market share after expiration of exclusivity.
Generic fluoxetine initially cost $1.91 per capsule, or 12 percent below the price of Prozac. The price of the generic remained steady until six months after its introduction, when Barr Laboratories’ period of generic exclusivity for fluoxetine expired. During the subsequent year, while the cost of Prozac increased from $2.25 to $2.40 per capsule, the price of the generic dropped to 32 cents. Generic fluoxetine as a proportion of all fluoxetine prescriptions continued to increase slowly, reaching 89 percent by the end of the study period (Exhibit 3
On average, by the end of the study period, consumers in this PBM paid $0.44 per capsule out of pocket for brand-name Prozac, versus $0.24 per capsule for the generic. This $0.20 in out-of-pocket savings represented 9.6 percent of the total $2.08 savings in total costs per capsule between generic ($0.32 per capsule) and brand-name fluoxetine ($2.40 per capsule). Thus, at least in the short run, consumers, who bore only a small proportion of the total costs, reaped only a small proportion of the overall savings obtained from the introduction of the generic preparation.
Just a decade ago, generics took about a year on average to surpass their originator products in market share.11 For the PBM in this study, AdvancePCS, this process took only two weeks. What drove this extraordinarily rapid adoption of generic fluoxetine, and who benefited from its introduction? Answering these questions can provide insight into the current managed pharmaceutical market. What drove the diffusion of generic fluoxetine? We found that greater differences in copayments between the generic and brand-name products were associated with greater use of the generic, consistent with a long literature demonstrating that financial incentives affect patients’ use of medications.12 However, even among patients with no difference in copayments between generic and brand-name fluoxetine, nearly two-thirds were either started on or switched to the generic preparation. This suggests that while consumer incentives may have played a role in driving the adoption of generic fluoxetine, other, broader forces were also at work. Current state regulations on generic substitution can provide one context for understanding this finding. In the eleven states in which pharmacists are required by law to substitute generic for brand-name products, only 31 percent of new fluoxetine prescriptions were filled for Prozac, largely because of "dispense as written" orders by physicians. In the remaining states, where laws permit but do not require such substitution, the percentage of new Prozac prescriptions (36 percent) was significantly higher, but still low in absolute terms. The rising use of state laws governing generic substitution may be dampening the impact of patients’ and providers’ incentives in the use of these generic products.13 In contrast, states generally prohibit "therapeutic interchange," the replacement of brand-name prescriptions by other related but chemically distinct products, without the consent of the prescribing clinician. There was little evidence in our study that physicians switched patients from other SSRI antidepressants such as Paxil (paroxetine) and Zoloft (sertraline) to generic fluoxetine, even though these antidepressants have similar effectiveness as fluoxetine.14 Even within PBMs, it is much more complex to implement therapeutic interchange programs, which require participation by both physicians and pharmacists, than to use generic substitution plans, which can be initiated by pharmacists alone.15 Such programs may be particularly difficult to use for psychotropic drugs, because of the relative heterogeneity of these therapies and of the mental disorders they treat.16 Who benefited from the introduction of generic fluoxetine? Large health care purchasers have been among the most vocal proponents of widespread use of generic medications. In the case of generic fluoxetine, these groups won a clear victory. Once Barr Laboratories’ 180-day period of generic exclusivity expired, purchasers saved 87 percent per tablet on the generic. As compared with retail pricing (from www.drugstore.com), generic fluoxetine in this PBM was discounted by more than two-thirds ($0.32 for the PBM versus $1.13 retail per tablet). In contrast, the discount for Prozac was far more modest ($2.41 for the PBM versus $3.06 for retail prices). PBM companies generally earn larger profits on generic drugs than on brand-name products, because they retain a larger portion of the discounts they negotiate with generic manufacturers. The growing use of generics has been cited as a factor fueling the PBM industry’s recent prosperity, and AdvancePCS did post record earnings for the fiscal quarter after generic fluoxetine was introduced.17 However, PBMs are reluctant to report their administrative costs and fees to purchasers, pharmacies, and even regulators, and we did not have access to these proprietary data for this study.18 Thus, although it is likely that AdvancePCS benefited from the introduction of the generic, we could not quantify these benefits. Barr Laboratories, which brought the first generic version of fluoxetine to market, was also a major winner. In the quarter after it introduced generic fluoxetine, Barr reported that its net earnings per share had risen by 640 percent over the same quarter a year earlier.19 First entrants into the generic market, protected from competition by other generic companies for 180 days, price their products only a small percentage below the branded originator’s price. A former Federal Trade Commission (FTC) official has described the process as "like printing money."20 Eli Lilly fought a six-year court battle with generic manufacturers to seek to preserve or extend Prozac’s exclusive patent status.21 In the year before its patent expiration, Lilly released two new fluoxetine preparations, Sara-fem (marketed for premenstrual dysphoric disorder) and Prozac Weekly. Ultimately, however, Eli Lilly was unable to prevent the release of generic fluoxetine or to stanch the company’s loss of its share of the antidepressant market. In the fiscal quarter after the generic was released, Eli Lilly’s net earnings dropped by 22 percent compared with the previous year, a loss the company attributed almost entirely to the expiration of its exclusive patent on Prozac.22 For consumers and other drug manufacturers, the impact of the release of generic fluoxetine was less evident. Consumers saw only a small portion of the cost savings from its introduction, largely reflecting the fact that they bore only a small proportion of total medication costs. The growth of third-party coverage in the past decade has greatly reduced the role of out-of-pocket costs and the overall role of consumers in determining drug choice.23 For other drug manufacturers, the stability of antidepressant market share after the release of generic fluoxetine may provide only limited comfort. Zoloft’s patent will expire in 2005, and Paxil’s, which had been scheduled to expire in 2006, has already been preempted by the release of a generic version of a chemically modified version of paroxetine.24 Study limitations. The study’s results should be considered in the context of at least two limitations. First, the study sample included only people with third-party drug coverage, which limits its external validity beyond such insured populations. This issue is partly mitigated by the fact that this third-party coverage has become the predominant mode of payment for prescription drugs in the United States. Second, individual data were only available for five months after the release of generic fluoxetine; it would have been useful to have been able to follow all data beyond the period of expiration of generic exclusivity. In the face of increasing costs and consumer demand for affordable prescription medications, the coming years are likely to see a growing reliance on generic substitution and PBMs. The story of generic fluoxetine provides an early glimpse into how these trends are changing the face of the pharmaceutical market, and the roles of its many constituencies—manufacturers, purchasers, managers, and consumers.
Benjamin Druss (bdruss{at}emory.edu) is the Rosalynn Carter Chair in Mental Health, Emory University, in Atlanta. Steven Marcus is a research assistant professor in the School of Social Work, University of Pennsylvania, in Philadelphia. Mark Olfson is a professor of clinical psychiatry at the New York State Psychiatric Institute and Department of Psychiatry, Columbia University College of Physicians and Surgeons, in New York City. Harold Alan Pincus is a professor and executive vice-chair of the Department of Psychiatry and a senior scientist at and director of the RAND–University of Pittsburgh Health Institute, in Pittsburgh, Pennsylvania. This work was funded in part by the University of Pittsburgh National Institute of Mental Health (NIMH)–funded Mental Health Intervention Research Center on Mood and Anxiety Disorders, the Robert Wood Johnson Foundation, and NIMH Grant no. K08-MH01556-01A.
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