Many Missing Boat on Generic Drugs

Study found $8.8 billion could be saved each year in U.S.

MONDAY, June 6, 2005 (HealthDay News) -- The United States could save $8.8 billion a year, or 11 percent of total drug expenditures, if adults substituted generic medications for brand-name drugs.

But this easy opportunity to cut down on health-care costs is often lost, said the authors of a study appearing in the June 7 issue of the Annals of Internal Medicine.

"It's a lot of money at relatively low cost," said study author Dr. Jennifer S. Haas, an associate professor of medicine at Brigham and Women's Hospital and Harvard Medical School in Boston. "It's not an amount that requires sacrifice in terms of denying people coverage for something."

Spending on prescription drugs has been growing at a rate of about 10 percent per year, according to the study authors. A recent AARP study also found that while the cost of most brand-name drugs is rising, increases in the cost of generic prescription drugs has slowed or leveled off. These costs are a central concern in the current efforts to reform Medicare.

Generic drugs are less expensive than the brand names, and become available several years after the brand names have already been on the market.

Haas and her colleagues looked at year 2000 data on health care from more than 10,000 households that had participated in the Medical Expenditure Panel Survey Household Component.

Fifty-six percent of all outpatient drugs used were available in both brand name and generic form.

Of these, 39 percent could have been dispensed in the generic version but were not. If they had, every adult younger than 65 years would have had a median annual savings of $46, while adults 65 and older would have saved $78 per year. National savings in the younger age group would have been $5.9 billion and, in the older age group, $2.9 billion, the study found.

"The per capita savings is larger for the older group," Haas explained. "There are more younger adults, so the absolute savings is larger for that group."

With such a simple solution already at hand, why aren't more people taking advantage of it?

Some patients think that brand-name drugs are better than generic ones, even though the U.S. Food and Drug Administration has said the two classes are "bioequivalent."

"Some people don't trust generics," said David Gross, senior policy advisor at the AARP Public Policy Institute. "They'll say, 'If the doctor writes the brand name, I'd better stick with what the doctor ordered.' "

But with a few exceptions, namely people who might be allergic to inactive ingredients such as dyes in generic drugs, "for most people there should be no difference in switching," Gross said.

Both patients and physicians need better education that "generics aren't a second-tier product, that they really are equivalent," Haas said.

And insurers might want to increase the reimbursement differential between generics and brand-name drugs to tilt the balance toward the former, she said.

Legislation would no doubt also make a difference.

Currently, about 40 states have laws permitting generic substitution, but they vary in how strict they are, Haas said.

"The number of states that mandate substitution in all circumstances is very few," she added. "And many physicians can override that by checking a box."

But even before any systemic change takes place, individuals have ample opportunity to find more savings for themselves, Gross said.

"Without question, this is a strategy individuals could take on their own," he said. "Those are good ways to save money on drugs."

More information

AARP can help you compare generic and prescription drugs.

SOURCES: Jennifer S. Haas, M.D., associate professor, medicine, Brigham and Women's Hospital and Harvard Medical School, Boston; David Gross, Ph.D., senior policy advisor, AARP Public Policy Institute, Washington, D.C.; June 7, 2005, Annals of Internal Medicine
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