Study: Generic use could save $14 billion

April 1, 2002

Pharmaceutical Representative

A new study highlights the increased savings offered by generic drugs.

A new study, "Greater Use of Generics: A Prescription for Drug Cost Savings," released by the Schneider Institute for Health Policy at Brandeis University, Waltham, MA, highlights the increased savings offered by generic drugs. The study concludes that Medicare can save billions of dollars in a proposed drug benefit program through generic pharmaceutical incentive techniques currently used in the private sector.

The study found that:

•Â For Medicare's 40 million beneficiaries, a total savings potential of $14 billion (16.3% or $350 savings per individual) in 2003 is possible the rate of generic usage is increased to that of similar high-performing private-sector plans.

•Â Over a ten-year period, more than $250 billion in savings could be achieved.

•Â Adopting a benefit design and implementation strategy that encourages greater use of generic medications would significantly lower the cost of a Medicare drug benefit.

"The report concludes that substantial savings can be realized if generic drug incentive techniques used in the private sector are broadly applied within a Medicare prescription drug program," said Stan Wallack, primary author of the report. "Effective private sector initiatives currently in use that encourage appropriate generic utilization would either substantially reduce the cost of a Medicare prescription drug benefit or dramatically increase its value."

A priority for Medicare

Citing President Bush's call for a new prescription drug benefit within Medicare during his State of the Union address, Carole Ben-Maimon, board chair of the Washington-based Generic Pharmaceutical Association, said, "The timing of this study could not be better. Its message could not be clearer. As Congress reconvenes for the 2002 legislative session, providing high-quality, low-cost healthcare continues to be a priority for all Americans, and particularly for those in the Medicare program. As the study points out, the savings generated from generic utilization could go a long way toward making a Medicare drug benefit possible. Likewise, increased generic utilization could make an existing benefit more generous."

PhRMA: No incentives needed

The Washington-based Pharmaceutical Research and Manufacturers of America disagreed with the report's conclusion that government incentives were needed to increase the use of generics.

"To put it bluntly, they don't need any incentives to increase generic use," said Jeff Trewhitt, spokesman for PhRMA. "The use of generics has increased from 18% of the prescription drug market in 1984 to 47% today. Some database services are estimating that by 2005, the portion of the marketplace that is generic could be as high as 56%. So it's already happening, and it's happening through marketplace forces." PR

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