Free Drugs

The bad news is: The only free drugs I know of were available to members of Blue Cross & Blue Shield of Rhode Island (BCBSRI) who have allergies. The good news is, I can definitely see the idea catching on.

BCBSRI ran a year-long test through its pharmacy benefits manager, WellPoint (NYSE: WLP). It offered over-the-counter (OTC) drugs, such as generic versions of Schering-Plough's (NYSE: SGP) Claritin, for free to encourage members to switch from higher-cost prescription drugs such as Sanofi-Aventis' (NYSE: SNY) Allegra. The program benefited not only the members, but also the health insurer's bottom line. The cost of the OTC drugs plus the lost copay was still far less than what BCBSRI would have to pay for a prescription drug.

The rollout might be gradual, but I think we'll see bigger health insurers like UnitedHealth (NYSE: UNH) and Aetna (NYSE: AET) adopting similar programs. And I'd imagine we'll see them extend beyond allergy sufferers into other illnesses, like acid reflux, where OTC treatments can work for some patients.

If the practice really catches on -- and why wouldn't it? -- it could be a win for everyone except the pharmaceutical companies. The real winners could be the generic-drug makers who specialize in OTC drugs, like Perrigo (Nasdaq: PRGO) and Dr. Reddy's Laboratories (NYSE: RDY), which is also making a push into this space. There will probably be some switching from prescription generics to OTC generics, but many patients who switch will likely be coming off branded drugs, so the net effect should be more generic drugs sold.

Don't just toss the next flyer your health insurance company mails you. It could be your ticket into a free-drug program.

Your ailing portfolio needs a Foolish treatment:

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.