Walgreens' ongoing efforts to boost generic drug utilization is paying off, as the drugstore chain posted record profits during its fiscal first quarter, driven by a 5.2 percent increase in generic sales, the company said recently.

Walgreens, which already fills close to 60 percent of its prescriptions with generic drugs, will also continue to emphasize generic drug utilization in its pharmacy benefit management (PBM) unit, a Walgreens spokesman told FDAnews.

Drugstore chains and pharmacy benefit managers have seen profit margins soar on increased generic drug utilization because generic drugs can be marked up more than brand counterparts yet are sold at a lower cost than brand alternatives. Walgreens and rival CVS both own PBMs, and the three largest U.S. PBMs — Express Scripts, Caremark Rx and Medco Health Solutions — have steadily raised the percentage of generic drugs they dispense over the last few years.

Walgreens said its profit margin increased 16 points to 27.54 percent due to growth in generic drug sales. Prescription sales also increased 10.3 percent. The drugstore chain said its net earnings for the three months ended Nov. 30 were $345.6 million or 34 cents per share, up from $328.6 million or 32 cents per share during the same period a year ago.

The drugstore chain has already increased generic drug use in patients served by Walgreens Health Initiatives, its PBM unit, by allowing PBM clients to refill prescriptions at pharmacies as well as through the mail, Walgreens spokesman Michael Polzin told FDAnews.

"There's particular opportunity through 90-day prescription refill programs," Polzin said. "If a patient can get it at a retail pharmacy rather than through the mail, that offers another opportunity to convert the patient to a generic when available." Walgreens' PBM program currently serves about 5 million people, Polzin said.

Indeed, allowing PBM patients to fill prescriptions at the pharmacy saves an average of $10 or 7 percent over filling prescriptions through the mail, Walgreens executives said at the JP Morgan Consumer and Retail Holiday Conference held in November.

Rick Hans, Walgreens' finance director, said that with the "record" number of brand drugs set to go off patent in fiscal 2006, "we anticipate record new generic drug introductions that could equal about 7 percent of total current prescriptions we fill," Hans said. "We'll see plenty of new generics hitting the market during the year, but the biggest ones — generics for Zocor and Zoloft — are expected to be introduced late in our fiscal year, thus having a larger impact in our fiscal 2007," Hans added.