"Even though brand name medications cost more, there is a lower margin for these medications," he said. "Plus, the business model of the PBM is to drive down cost for their clients. The entire brand to generic transformation fits exactly into the role of the PBM. In fact, PBMs should be valued on how quickly they can convert their patients from a brand to the corresponding generic. It's a win-win for everyone involved."

Jeffrey Lewis, chief operating officer for EHIM pharmacy benefits managers, said that the price drop will cause a shrinking profit margin for pharmacies, and this may cause them to try and renegotiate contracts with PBMs.

"However, for PBMs operating on a true 'pass-through' model where there is no spread built in, the pharmacies will likely pass their costs on to the consumer," he said.

Employers embracing the process

Employers have no need to be concerned about the price drop — Lewis said its a win-win situation as far as they're concerned.

"Competition is always good for employers," he said. "Greater availability and usage of generic medications should translate into less member out-of-pocket costs which may result in higher adherence rates."

Schrieber said that many employers will embrace the brand-to-generic process because of cost issues. Employers are savvy customers, he said, and generic medications can save both employees and the companies they work for lots of money. Making generics more widely available will only result in more savings.

"The employer wants as much influence in selecting a generic that in many cases can save well over 50 percent for the same medication the patient was getting while taking the brand medication," Schrieber said. "Not only does the patient save via a reduced co-pay, but the employer saves because their portion of the medication costs are also significantly reduced."

However, Lewis cautions that "specialty medications" may suck the savings earned from generics right back from employers. More and more drugs and being classified in this category, Lewis said, and these medications are experiencing double-digit rate increases as new medications enter the market with no generic competition.

"This is a direct cost shift and can adversely impact employers if their formularies are not carefully managed, and they are not watching the bottom line," Lewis said. "While specialty medications may only represent 3 – 5 percent of the volume of claims, [they] could represent up to 25 percent of the total spend for a group."

A time to celebrate

According to Schrieber, this price drop is something that every pharmacy benefit manager should be celebrating.

"Not only will their clients see a significant reduction in cost and drug tend," he said, "their patients will see a cost reduction and hopefully there will be an increase in compliance. This benefit should extend far beyond employers to local, state, and the federal government. As unions begin to share more of the costs to their members, this will also be something that will help reduce costs."

But Lewis notes that celebrating the price drop needs to be done cautiously — and as a team.

"PBMs cannot celebrate unless they are helping employers share in the savings," he said. "With many PBMs still operating on the rebate-driven strategy, a greater availability of generics will only help an employer if their PBM is using the right tools to properly manage their client's pharmacy benefits."