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CVS Caremark Study Finds State Policies Can Significantly Impact Rates of Generic Substitution and Medicaid Costs

Wednesday, July 7, 2010 General News J E 4
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WOONSOCKET, R.I., July 7 States struggling to pay for increasing health care costs through their Medicaid programs can save more than $100 million over the next several years by changing generic substitution laws to permit easier and faster substitutions of generics for brand medications, a new CVS Caremark (NYSE: CVS) has found.

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The study, published in the July edition of Health Affairs, looked at the generic substitution of simvastatin for cholesterol brand drug Zocor over six quarters beginning June 23, 2006, when Zocor's patent expired. The review looked at how quickly Medicaid recipients moved to the generic equivalent medications under three different state statutes - mandatory versus permissive substitution, with and without prior authorization, and with and without requiring patient approval for substitution. The generic substitutions discussed in the study are for chemically identical generics for brand name drugs.

"Requiring patients to provide consent prior to generic substitution led to an approximately 25% reduction in generic substitution," said Dr. William H. Shrank, the study's lead author, an Assistant Professor of Medicine at Harvard Medical School in the Division of Pharmacoepidemiology at Brigham and Women's Hospital in Boston. During the six consecutive quarters reviewed, the study determined that states could have saved almost $20 million if the substitution from Zocor to the chemically-identical simvatstatin were made more quickly for that one medication.

"This study has important implications. We determined states can stem the rising cost of medications paid for by Medicaid programs by modifying statutes to make it easier to replace brand name medications with generics," said Troyen A. Brennen, MD, MPH and Executive Vice President and Chief Medical Officer of CVS Caremark. "There are many brand medications that will lose their patent protection over the next several years and, as a consequence, we will see the introduction of generic equivalents for these brand medications. In particular, we can expect significant activity with the upcoming patent expirations of Lipitor, Plavix and Zyprexa over the next eighteen months.

"The study estimates state Medicaid programs can save more than $100 million on those three drugs alone by adopting regulations that allow pharmacists to make a change following the patent expiration, without requiring direct patient approval. This is action that policy makers can take immediately to save money without affecting the quality of pharmacy care," he said.

Brennan said cost containment and finding ways to better manage increasing health care costs is extremely important in the face of the current economic climate and expected expansion of state Medicaid programs resulting from federal health care reform. The study involved a review of Medicaid claims data between June 2006 and 2008 in 48 states and the District of Columbia.

The study published in Health Affairs is the result of CVS Caremark's previously announced three-year collaboration with Harvard University and Brigham and Women's Hospital to research pharmacy claims data to better understand patient behavior around medication adherence and appropriate medication use. In addition, earlier this year the company launched a Behavior Change Research Partnership with academic leaders from Carnegie Mellon University, Dartmouth College's Tuck School of Business and the University of Pennsylvania's Medical School and Wharton School of Business to develop insights into consumer actions around health challenges through the lens of behavioral economics and social marketing.

CVS Caremark is undertaking these studies because patient non-adherence to essential chronic medications is widely recognized as a barrier to improving public health and a cause of increasing medical costs. Past studies show one-quarter of people receiving prescriptions never fill their first prescription, and patients with chronic diseases such as diabetes and coronary artery disease adhere to their ongoing medication regimen about half of the time. Non-adherence to essential medications is a frequent cause of preventable hospitalizations and patient illness, with costs to the U.S. health care system estimated at about $300 billion annually.

About CVS Caremark

CVS Caremark is the largest pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access, to engage plan members in behaviors that improve their health and to lower overall health care costs for health plans, plan sponsors and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and is a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefits managers (PBMs), we provide access to a network of more than 64,000 pharmacies, including approximately 7,000 CVS/pharmacy® stores that provide unparalleled service and capabilities. Our clinical expertise includes one of the industry's most comprehensive disease management programs. General information about CVS Caremark is available through the Company's Web site at http://info.cvscaremark.com.

Contacts: Jon Sandberg Nancy Christal Corporate Communications Senior Vice President (401) 770-4914 Investor Relations (914) 722-4704

SOURCE CVS Caremark
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