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Generic Medicines Offer Billions in Medicaid Savings
Generic medications saved the US health care system more than $824 billion in the past decade and $139.6 billion in 2009 alone, according to a report released in July by the Generic Pharmaceutical Association (GPhA). Commissioned by GPhA and conducted by leading market research firm IMS Health, the report yielded several insights that confirm generic substitution as a viable strategy to reduce health care costs.

“This new analysis shows beyond a doubt that generic use is a proven way of bending the health care cost curve downward,” said Paul Bisaro, chairman of GPhA’s board of directors. “Policies that encourage greater use of generic medication can help states afford the cost of implementing expanded Medicaid coverage under new health care reform laws,” he added.

The findings were released on the heels of a working paper published by the American Enterprise Institute on July 21, 2010. The paper focused on savings lost when Medicaid programs engage in “wasteful spending” by reimbursing pharmacists for expensive brand name drugs, despite the availability of generic alternatives. The practice accounted for $271 million in overspending last year, estimated Alex Brill, the paper’s lead author and a former senior adviser and chief economist to the House Ways and Means Committee.

“The simple solution of substituting generic equivalents for brand name drugs would save nearly $100 per prescription for the top 20 most dispensed drugs,” GPhA officials wrote in response to Brill’s analysis. Additional research by GPhA estimates that 75% of all prescriptions distributed in the United States are filled with generic drugs—yet generic drugs account for just 22% of total drug spending.

In a statement accompanying the IMS Health study, GPhA also noted that greater savings could be achieved in the future by increasing funding of FDA’s Office of Generic Drugs, eliminating market exclusivity for brand name biologics, and ensuring that generics reach the market sooner by continuing to allow generic manufacturers to settle patent challenges. To learn more, go to www.gphaonline.org.