NCPA - National Center for Policy Analysis


July 30, 2010

Although Medicaid can reduce its drug spending by about $1 billion annually for every 2 percent increase in the substitution of generic drugs from brand name medications, the program uses off-brand prescriptions much less than the general population, according to a report by the Generic Pharmaceutical Association (GPhA). 

According to the report -- based on an analysis by IMS Health: 

  • The U.S. health care system overall saved $139.6 billion in 2009 by purchasing generic medications, a 15 percent increase over savings in the previous year.
  • However, Medicaid's generic utilization rate is only about 64 percent -- about 10 percentage points lower than the general population -- indicating the potential for significant savings. 

The increase in generic drug use can be attributed to the launch of generic versions of several blockbuster brand-name drugs, including generic versions of the antidepressants Zoloft, Norvasc and Zocor.  Savings for such drugs increased 20 percent in 2009 to $49 billion, while savings for generic versions of cardiovascular drugs rose 14 percent to $37.3 billion. 

GPhA's report comes after the American Enterprise Institute last week issued a report released that found Medicaid overspent by at least $271 million in 2009 on brand-name drugs when generic alternatives existed.  The report also found that about 75 percent of the extra spending came on drugs with generic versions that most recently entered the market in 2008 or 2009.  The authors of the GPhA report urged the Food and Drug Administration (FDA) to regulate brand-name drugmakers who attempt to "evergreen" patents "and thereby stall generic competition." 

Source: Brittany Hackett, "Generics Can Offer Significant Savings, Report States," American Health Line, July 28, 2010. 

For report:  

For Wall Street Journal text:  

For AEI report:


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