New generic drugs can save you money

When the blockbuster cholesterol drug atorvastatin (Lipitor) finally became available as a generic last November, people who were taking it looked forward to lower prices. (Lipitor costs about $191 a month.) But it's only now, six months since the expiration of Lipitor's patent, that prices for atorvastatin have begun to drop. And it could be a year or more before consumers and their health plans see substantial savings.

The same delayed savings will apply to many other widely used drugs whose patents are set to expire by 2013.

Why? The answer has to do with complex laws that govern pharmaceutical patents, says Stephen Schondelmeyer, Pharm.D., Ph.D., a pharmaceutical economics professor at the University of Minnesota. Before a company's patent on a drug expires, manufacturers of generics often race to file lawsuits to challenge the patent. The company that wins gets a six-month exclusive to sell the drug.

That doesn't always happen. But when it does, the market doesn't really open to competition until multiple manufacturers can start making the generic version of the drug. By the end of the first year, the price can drop by as much as half the original cost, Schondelmeyer says. By the second year it can fall by 70 percent, and by year three it can drop by as much as 95 percent of the original amount.

During the next few years an unprecedented number of widely used brand-name drugs will become available as generics. Ten noteworthy ones that are available now or will be no later than early 2013 are listed in the chart below.

Even after a drug goes generic, some drug plans, including Medicare Part D, charge lower co-payments for the branded version than for its generic counterpart. That has to do with agreements between insurers and pharmaceutical companies that make it seem like the name-brand drug is the better deal.

But even if you pay only $3 a month for Lipitor (as is the case for people covered by the Cigna RX1 plan, for example), the entire cost of the drug under that plan—$167—is put toward your "doughnut hole" limit of $2,930. If you take multiple drugs, that raises the chance that you'll hit the maximum before year's end, at which point you'll start paying half the cost of your brand-name drugs. If you're concerned about cost or maxing out your coverage, ask your doctor to prescribe the generic version of a drug whenever available, even if it means a few extra dollars in co-payments up front.

*Retail prices for 30-day supply are for the most common dosage and are derived from data provided by Wolters Kluwer Pharma Solutions, which is not involved in our analysis or recommendations.