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Why Some Health Insurance Companies Only Cover Generic Drugs

2010-07-14

Many health insurance companies will only cover generic drugs in an effort to cut costs, keep premiums affordable, and ensure health insurance coverage in the future. The costs of prescription drugs have drastically increased over the years and are expected to continue to rise substantially over the next ten years. Most consumers are completely oblivious to the cost of brand name medications and the substantial cost to contractually-bound health insurance companies that often are unable to obtain rate increases in order to accommodate these costs. Consequently, consumers routinely request brand name medicines that are more expensive and create financial deficits for the insurance companies. In an effort to curtail, equalize, and minimize the rising costs of policyholders' prescription drug expenses, many companies have created protocols that require and encourage the use of generic prescription medications.

Healthcare insurance providers have taken steps to minimize prescription drug costs. Now, many companies will only provide coverage for generic drugs, a savings that ultimately benefits policyholders. If prescription costs continue to skyrocket, the entire health insurance industry could subsequently be compromised. Often, consumers had preconceived ideas, inaccurate information, and were using faulty reasoning in believing that the generic drugs were inferior. The FDA demands that the generic equivalent has primarily the same formulation, quality, and medicinal effect as the brand name drug. There may be cosmetic differences, but the chemical configuration is within 5 percent of the brand name drug. Before instituting limitations and exclusions on brand name medications, insurers were suffering considerable losses because they were assuming the majority of the cost of these medicines, with the exception of a small co-pay of typically $10.00, which did not offset the exponential costs.

Although some health insurance providers will cover brand name drugs, especially if there is not a generic alternative available, such as Plavix or Lipitor, they require a consequential deductible, equally high co-pay, as well as an annual maximum limitation which places the financial responsibility on the policyholder. Most health insurers will only provide insurance coverage for generic drugs for the stated low co-pay, usually less than $5.00.

It was necessary for health insurers to enact exclusions of brand name medications in order to be able to continue to provide health insurance coverage. This cost saving measure was reasonable and responsible; the average brand name medications typically cost more than $100.00, while the chemically identical generic equivalent is available for less than a third of that cost. Therefore, by substituting generic drugs for brand name medication, insurance companies have saved millions of dollars that have helped to keep health insurance premiums within the budget of policyholders. The exclusion has meant that patients can afford medications to promote their health and well-being.

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