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Potential Savings from Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997–2000 FREE

Jennifer S. Haas, MD, MSPH; Kathryn A. Phillips, PhD; Eric P. Gerstenberger, MS; and Andrew C. Seger, PharmD
[+] Article and Author Information

From Brigham and Women's Hospital, Boston, Massachusetts; and University of California, San Francisco, San Francisco, California.


Acknowledgments: The authors thank Jaylyn Olivo for editorial assistance and Dr. Michael Fischer for comments on an earlier version of the manuscript.

Potential Financial Conflicts of Interest: None disclosed.

Requests for Single Reprints: Jennifer S. Haas, MD, MSPH, Brigham and Women's Hospital, Division of General Medicine and Primary Care, 1620 Tremont Street, Boston, MA 02120; e-mail, jhaas@partners.org.

Author Contributions: Conception and design: J.S. Haas, K.A. Phillips.

Analysis and interpretation of the data: J.S. Haas, K.A. Phillips, E.P. Gerstenberger, A.C. Seger.

Drafting of the article: J.S. Haas.

Critical revision of the article for important intellectual content: K.A. Phillips, A.C. Seger.

Final approval of the article: J.S. Haas, K.A. Phillips, E.P. Gerstenberger, A.C. Seger.

Provision of study materials or patients: J.S. Haas.

Statistical expertise: J.S. Haas, E.P. Gerstenberger.

Obtaining of funding: J.S. Haas, K.A. Phillips.

Administrative, technical, or logistic support: J.S. Haas.

Collection and assembly of data: J.S. Haas, K.A. Phillips.

Current Author Addresses: Drs. Haas and Seger and Mr. Gerstenberger: Brigham and Women's Hospital, Division of General Medicine and Primary Care, 1620 Tremont Street, Boston, MA 02120.

Dr. Phillips: Box 0613, University of California, San Francisco, San Francisco, CA 94143.


Ann Intern Med. 2005;142(11):891-897. doi:10.7326/0003-4819-142-11-200506070-00006
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Editors' Notes
Context

The cost of prescription drugs is of great concern to Americans. The substitution of cheaper generic drugs for more expensive brand-name drugs might reduce prescription drug costs.

Contribution

Using data from the 1997–2000 Medical Expenditure Panel Survey Household Component, the researchers estimated that substitution of a generic for a brand-name drug whenever available would have saved approximately $46 per year for adults younger than 65 years of age and approximately $78 per year for older adults.

Implication

While the per capita savings of generic substitution appear modest, national savings would be substantial: about $6 billion for adults younger than age 65 years and about $3 billion for older adults.

–The Editors

Prescription drug spending is increasing at a rate of over 10% per year and currently represents 11% of all health care expenditures (1). In 2001, expenditures for prescription drugs in the United States were $141 billion (1). The passage of a Medicare prescription drug benefit has resulted in much debate about the cost of this coverage. The program is designed to offer $410 billion in new drug benefits over a 10-year period (2). Containment of drug spending will be central to the stability of this benefit as well as health care expenditures in general.

Generic drugs are typically less expensive than brand-name drugs, and prices for generics have historically increased less than those for brand-name drugs (3). The U.S. Food and Drug Administration examines generic formulations and approves them as bioequivalent to brand-name drugs in safety, strength, and quality (4). Although the bioequivalence of some drugs is controversial (57), generic drugs are widely believed to provide the same therapeutic effects as their brand-name alternatives (4).

Use of a generic formulation instead of a brand name for multisource drugs (that is, those with ≥1 generic available) could be one mechanism for limiting drug expenditures. Since the 1980s, almost every state has enacted laws to allow and in some cases mandate generic substitution (8). Patients, physicians, and pharmacists may also influence whether a generic is dispensed for a multisource product (915). A study of Medicaid prescription drug spending in 2000 found that $229 million, approximately 1% of the total amount reimbursed for prescription drugs by Medicaid, could have been saved by wider use of generic drugs (16). Despite the importance of this issue, we know of no estimates of the potential savings associated with greater generic substitution in populations other than Medicaid beneficiaries.

The objectives of this study were to estimate the use of multisource drugs, specifically generic formulations, among a nationally representative sample of adults. We also estimated the potential savings associated with broad substitution of generic drugs for all multisource products. Because of their implications for the Medicare drug benefit, our findings are stratified by age.

Data

This analysis is based on data from the 1997-2000 Medical Expenditure Panel Survey Household Component (MEPS-HC), which involved a nationally representative sample of the civilian, noninstitutionalized U.S. population and was conducted by the Agency for Healthcare Research and Quality (17). The MEPS-HC sample is drawn from respondents to the previous year's National Health Interview Survey (NHIS). The NHIS uses a stratified, multistage probability cluster sampling design to obtain a representative sample of the U.S. population and oversamples persons of African-American and Hispanic ethnicity (18). The MEPS-HC data include sampling weights that reflect the sampling frame and adjustments for household nonresponse. The MEPS-HC provides data on demographic characteristics, health status, insurance coverage, and the utilization of health care services for all individuals in sampled households. Household respondents provided information on the names of all outpatient medications used by each household member and the names and locations of the pharmacies where each medication was obtained (19). They were also asked for permission to request records from these pharmacies. Pharmacy providers were asked to provide the data necessary to assign a National Drug Code, which is specific for manufacturer, ingredients, strength, package size, quantity dispensed, total charge, and sources of payment. The linkage rate between information provided by respondents and data obtained from pharmacies was 67% in 1997, 79% in 1998, 79% in 1999, and 77% in 2000. The Agency for Healthcare Research and Quality performed detailed matching, imputation, consistency checks, sensitivity checks, and reconciliation algorithms (19).

Data for each drug from the First DataBank National Drug Data File were merged with the MEPS data by using the National Drug Code. The National Drug Data File indicates whether a drug is available only as a brand name or as a multisource product; generic status is assigned annually. The National Drug Data File also includes a categorization of the therapeutic class and the average wholesale price for each product. The average wholesale price is the manufacturer's suggested list price for a wholesaler to charge a pharmacy and is typically higher than a pharmacy's actual acquisition cost, particularly for brand-name drugs (3).

Study Sample

Adults who were older than 18 years of age and used at least 1 outpatient multisource product were included in this analysis. Brand-name drugs were included in the analysis only if a generic alternative was available in an identical strength and form. A median of 4 prescriptions per person (range, 1 to 60 prescriptions per person) was included in this sample.

Calculation of Prices and Potential Savings

Because retail prices for medications vary widely and are not uniformly available, we used data from MEPS about the total expenditures for each drug (that is, the amount spent by an individual out-of-pocket plus the amount paid by any insurance coverage). We then calculated the mean total cost per unit (that is, per tablet, tube, vial, or dropper bottle, as appropriate) for each of the 7056 products used by individuals in our sample (that is, we calculated the average per unit cost for all occurrences of each product). The availability of the actual drug expenditures for each product is an improvement over previous estimates of drug costs, which used a standard discount of the average wholesale price because actual expenditures were not available (for example, estimating that all generic drugs cost 75% of the average wholesale price) (2021). We then estimated the annual savings that would result if each person in the sample switched from a brand-name drug to a corresponding generic formulation, using the following equation:

Annual savings = Σ (total units of brand-name product dispensed per year) × (average per unit expenditure for brand-name product – average per unit expenditure for identical generic product).

Using data from 2000, we calculated overall savings from a population perspective (for example, total saved for all people ≥65 years of age) and as median annual savings per person (for example, out-of-pocket savings plus savings to any insurance plan per person). Calculations were done with SAS, version 8 (SAS Institute, Inc., Cary, North Carolina); the sampling weights described earlier were used to account for differences in the probability of sample selection as a result of the clustered design, planned oversampling, and nonresponse. The weighted results therefore represent estimates for the noninstitutionalized U.S. population.

Role of the Funding Sources

This work was supported by the Agency for Healthcare Research and Quality (P01 HS10771 and P01 HS 10856). The National Cancer Institute provided partial support (R01 CA 10184). The funding sources had no role in the design, conduct, or reporting of the study.

Persons Using a Multisource Drug

Fifty-six percent of all prescription medications (345  781 observations that were weighted to represent 3 686 700 000 prescriptions from 1997 to 2000) were multisource drugs, accounting for 41% of total prescription drug expenditures. Of these drugs, 61% were dispensed as a generic. Generic use increased over the course of the study, from 58% in 1997 to 64% in 2000. In 2000, total medication expenditures for adults in MEPS were $53 billion for those younger than age 65 years and $27 billion for those at least 65 years of age.

Among adults who were dispensed a multisource drug in MEPS, approximately 75% were younger than age 65 years and approximately 25% were at least 65 years of age (Table 1). Most individuals in both age groups were women and described their race or ethnicity as white. Among individuals younger than 65 years of age, approximately half did not receive education beyond high school; the median household income was $54 761. While most of these working-age adults had employer-sponsored insurance, 14.4% were uninsured and 7.6% were covered by Medicaid or another public program. Most did not report any comorbid conditions. The median annual number of prescriptions dispensed was 3.

Table Jump PlaceholderTable 1.  Characteristics of Adults Using at Least 1 Multisource Drug, 1997–2000

Among individuals at least 65 years of age, 68.9% did not receive education beyond high school; the median household income was $26 274. Approximately 33% had only Medicare coverage, 57.1% had additional private coverage, and 9.5% had additional public coverage, including Medicaid. Almost half reported at least 1 comorbid condition. The median annual number of prescriptions dispensed was 8.

Characteristics of Multisource Prescriptions

For individuals younger than 65 years of age, the most common therapeutic classes of multisource drugs dispensed were psychiatric, analgesic, and cardiac (Table 2). Among individuals at least 65 years of age, cardiac drugs were the most common drugs dispensed, followed by diuretics and psychiatric drugs. Overall, 60.7% of multisource prescriptions were dispensed as generics. Thyroid medications were most likely to be dispensed as generics, and contraceptives were least likely. Broad generic substitution of antihistamines and cardiac, gastrointestinal, and hypoglycemic agents were each associated with a potential annual savings of more than $1 billion.

Table Jump PlaceholderTable 2.  Characteristics of Multisource Prescriptions Dispensed to Adults
Potential Median Annual Savings Associated with Generic Substitution

For adults younger than age 65 years, the median annual per person savings associated with broad generic substitution was $45.89 (interquartile range, $10.35 to 158.06) (Table 3). This savings would be shared between an individual and his or her health plan. Median per person savings increased with age and number of chronic conditions, and men saved more than women. Median per person savings were largest for low-income individuals and varied by insurance status.

Table Jump PlaceholderTable 3.  Potential Per Person Annual Savings in Total Drug Expenditures Associated with Switching from Brand-Name to Generic Formulation, 2000

For adults at least 65 years of age, the median annual per person savings associated with broad generic substitution was $78.05 (interquartile range, $19.94 to $241.72). Median per person savings increased with the number of chronic conditions and varied by insurance status.

National Savings Associated with Generic Substitution

The estimated national savings associated with widespread generic substitution in 2000 was $5.9 billion (95% CI, $5.5 billion to $6.2 billion) per year for adults younger than 65 years of age (11.1% of all drug expenditures) and $2.9 billion (CI, $2.6 billion to $3.1 billion) per year among those at least 65 years of age (10.7% of drug expenditures). From a national perspective, the potential annual savings associated with generic substitution among adults younger than 65 years of age was $4.1 billion for those with employer-sponsored insurance and $388 million for those with Medicaid or public coverage. For adults at least 65 years of age who were dually eligible for Medicare and Medicaid, the potential savings was $1.7 billion per year.

These findings suggest that broad generic substitution of outpatient prescription drugs could save approximately $8.8 billion, or approximately 11% of drug expenditures for adults in this sample, in the United States each year. For individuals at least 65 years of age, who are expected to be eligible for the new Medicare prescription drug benefit, the annual savings is estimated to be $2.9 billion, or approximately 10% of the annualized cost of this coverage after accounting for inflation (2). Despite these considerable societal savings, absolute per person savings would be small.

Although broad generic substitution would only modestly reduce national drug expenditures, the absolute savings, particularly at a time when employers and public programs are struggling with drug expenditures, are significant. Broad dispensing of generic products would achieve savings without compromising safety. Generic drugs are believed to provide therapeutic effects similar to those of their brand-name alternatives (4). The standards and regulations for manufacturing generic products are the same as for brand-name drugs (22). Recent efforts to remove barriers to generic drug approval suggest that policymakers see an opportunity to control expenditures through greater use of generic drugs (4, 23). However, some have argued that greater generic substitution could limit drug development by pharmaceutical companies because of decreased revenue (24).

Using aggregate data for Medicaid drug payments from 48 states in 2000, Fischer and Avorn (16) estimated that approximately $229 million (approximately 1% of total drug expenditures) could have been saved through wider generic substitution. These data did not include information on the 56% of Medicaid beneficiaries who were covered by a managed care plan in 2000 (25). Our estimate of the savings for persons covered solely by Medicaid was higher, perhaps because our sample included individuals covered by a managed care plan. Differences in the estimates may also be related to differences in the calculations of the cost of prescription medications. Fischer and Avorn's estimate was based on the lowest generic price for each product paid by Medicaid in a particular state, whereas ours was based on the average total cost reported by individuals in MEPS nationwide. Our analysis also estimated savings for individuals with other types of health coverage. Medicaid beneficiaries are likely to use a different array of brand-name and multisource drugs than adults with other forms of health coverage.

Choosing a brand-name drug when a generic is available may be influenced by a variety of factors. State laws regulate generic substitution. While most states permit pharmacists to substitute a generic unless directed by the physician or patient, a minority of states mandate that a pharmacist substitute a generic unless overridden by a physician's order (8). Health plan policies may facilitate the use of generic drugs. However, although tiered formularies may encourage the use of generics, they may also lead to greater out-of-pocket expenditures and even to the discontinuation of long-term medications (26). Reference pricing may encourage greater use of generic drugs by offering reimbursement for the lowest-priced therapeutically equivalent drug (27). Some patients may believe that a brand-name formulation is superior (910), perhaps because direct-to-consumer advertising influences patient beliefs about medications (28). Previous research has shown that physicians and pharmacists play an important role in the decision to choose a brand-name or generic formulation of a drug (1115).

Our analysis does not include the substitution of drugs within a class (that is, therapeutic substitution). We included only brand-name drugs with an identical generic. Therapeutic substitution of angiotensin-converting enzyme inhibitors has been shown to reduce expenditures without adverse clinical outcomes (29). Future research should more broadly examine the effect of therapeutic substitution on clinical outcomes and expenditures.

Our study has several additional limitations. Because retail drug pricing in the United States varies widely and is proprietary, there are no nationwide data to calculate actual costs or savings. For this reason, we used costs reported in MEPS. We do not have information about formularies or copayments required by health plans for specific products, both of which may influence the utilization of specific medications (26, 30). We also cannot calculate how much of the potential savings would benefit individuals or their health plans. Regardless of the distribution, however, we believe that the savings are important from a societal perspective because they result from curtailing unnecessary expenditures for drugs that have an identical generic available.

Our study examined the potential savings associated with generic substitution through 2000. In subsequent years, several “blockbuster” drugs have lost patent protection (3132). Because detailed pharmacy data were available for 67% to 79% of the MEPS sample (depending on the year), our findings underestimate total drug expenditures in the United States. We do not know whether MEPS respondents who used a multisource drug were more or less likely to be matched with a pharmacy claim. Finally, we did not examine the potential savings associated with greater generic substitution among children.

These data provide per person and national estimates of the potential savings associated with broad generic substitution of outpatient prescription drugs for adults. Interventions to stimulate competition in the generic market, to reduce the approval times for generic drugs by the U.S. Food and Drug Administration, and to limit opportunities to extend the patent life of brand-name drugs could increase the potential savings (3334). Greater use of generic medications could result in important health care savings in the United States while maintaining quality of care.

Henry J.  Kaiser Family Foundation. Prescription Drug Trends. Menlo Park, CA: Henry J. Kaiser Family Foundation; May2003.
 
Moon M.  How Beneficiaries Fare under the New Medicare Drug Bill. The Commonwealth Fund. June 2004. Available athttp://www.cmwf.org/usr_doc/moon_medicarerxdrug_ib_730.pdf.
 
.  Prescription Drug Trends—A Chartbook Update. Menlo Park, CA: Henry J. Kaiser Family Foundation; 2001.
 
Nightingale SL.  From the Food and Drug Administration. JAMA. 1998; 279:645. PubMed
 
Dong BJ, Hauck WW, Gambertoglio JG, Gee L, White JR, Bubp JL. et al.  Bioequivalence of generic and brand-name levothyroxine products in the treatment of hypothyroidism. JAMA. 1997; 277:1205-13. PubMed
 
Rennie D.  Thyroid storm [Editorial]. JAMA. 1997; 277:1238-43. PubMed
 
DeCara JM, Croze S, Falk RH.  Generic warfarin: a cost-effective alternative to brand-name drug or a clinical wild card? [Editorial]. Chest. 1998; 113:261-3. PubMed
 
National Institute for Health Care Management Foundation.  A Primer: Generic Drugs, Patents and the Pharmaceutical Marketplace. June 2002. Available athttp://www.nihcm.org/GenericsPrimer.pdf.
 
Gaither CA, Kirking DM, Ascione FJ, Welage LS.  Consumers' views on generic medications. J Am Pharm Assoc. 2001; 41:729-36.
 
Brennan TA, Lee TH.  Allergic to generics. Ann Intern Med. 2004; 141:126-30. PubMed
 
Hellerstein JK.  The importance of the physician in the generic versus trade-name prescription decision. Rand J Econ. 1998; 29:108-36. PubMed
 
Banahan BF 3rd, Kolassa EM.  A physician survey on generic drugs and substitution of critical dose medications. Arch Intern Med. 1997; 157:2080-8. PubMed
 
Mott DA, Cline RR.  Exploring generic drug use behavior: the role of prescribers and pharmacists in the opportunity for generic drug use and generic substitution. Med Care. 2002; 40:662-74. PubMed
 
Suh DC.  Trends of generic substitution in community pharmacies. Pharm World Sci. 1999; 21:260-5. PubMed
 
Ganther JM, Kreling DH.  Consumer perceptions of risk and required cost savings for generic prescription drugs. J Am Pharm Assoc (Wash). 2000; 40:378-83. PubMed
 
Fischer MA, Avorn J.  Economic consequences of underuse of generic drugs: evidence from Medicaid and implications for prescription drug benefit plans. Health Serv Res. 2003; 38:1051-63. PubMed
 
Cohen JW, Monheit AC, Beauregard KM, Cohen SB, Lefkowitz DC, Potter DE. et al.  The Medical Expenditure Panel Survey: a national health information resource. Inquiry. 1996; 33:373-89. PubMed
 
Cohen SB, DiGaetano R, Goskel H.  Estimation Procedures in the 1996 Medical Expenditures Panel Survey Household Component. Rockville, MD: Agency for Health Care Policy and Research; 1999. MEPS Methodology Report No. 5. AHCPR Pub. No. 99-0027. Available athttp://www.meps.ahrq.gov/papers/mr5_99-0027/mr5.htm.
 
Moeller JF, Stagnitti MN, Horan E, Ward P, Kieffer N, Hock E.  Outpatient Prescription Drugs: Data Collection and Editing in the 1996 Medical Expenditure Panel Survey (HC-010A). Rockville, MD: Agency for Healthcare Research and Quality; 2001. MEPS Methodology Report No. 12. AHRQ Pub. No. 01-0002. Available athttp://www.meps.ahrq.gov/PAPERS/mr12_01-0002/mr12.htm.
 
Cubanski J, Frank RG, Epstein AM.  Savings from drug discount cards: relief for Medicare beneficiaries? Health Aff (Millwood). 2004; W4:198-209. PubMed
 
Anderson GF, Shea DG, Hussey PS, Keyhani S, Zephrin L.  MarketWatch: Doughnut holes and price controls. Health Aff (Millwood). 2004; W4:396-404. PubMed
 
Murphy JE.  Generic substitution and optimal patient care [Editorial]. Arch Intern Med. 1999; 159:429-33. PubMed
 
Harris G.  Bush to back measures on generic drugs. New York Times. 12 June 2003:1.
 
Cruickshank JM.  The cases for and against prescribing generic drugs: don't take innovative research based pharmaceutical companies for granted. BMJ. 1988; 297:1597-8. PubMed
 
The Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured. Medicaid and Managed Care. December 2001. Available athttp://www.kff.org/medicaid/206803-index.cfm.
 
Huskamp HA, Deverka PA, Epstein AM, Epstein RS, McGuigan KA, Frank RG.  The effect of incentive-based formularies on prescription-drug utilization and spending. N Engl J Med. 2003; 349:2224-32. PubMed
 
Schneeweiss S, Dormuth C, Grootendorst P, Soumerai SB, Maclure M.  Net health plan savings from reference pricing for angiotensin-converting enzyme inhibitors in elderly British Columbia residents. Med Care. 2004; 42:653-60. PubMed
 
Robinson AR, Hohmann KB, Rifkin JI, Topp D, Gilroy CM, Pickard JA. et al.  Direct-to-consumer pharmaceutical advertising: physician and public opinion and potential effects on the physician-patient relationship. Arch Intern Med. 2004; 164:427-32. PubMed
 
Schneeweiss S, Walker AM, Glynn RJ, Maclure M, Dormuth C, Soumerai SB.  Outcomes of reference pricing for angiotensin-converting-enzyme inhibitors. N Engl J Med. 2002; 346:822-9. PubMed
 
Goldman DP, Joyce GF, Escarce JJ, Pace JE, Solomon MD, Laouri M. et al.  Pharmacy benefits and the use of drugs by the chronically ill. JAMA. 2004; 291:2344-50. PubMed
 
.  Drug and formulary trends. Formulary. 2002; 38:499.
 
Medco Health Solutions, Inc. Anticipated First-Time Generics, 2004-2006. Available athttp://www.medco.com/art/corporate/firsttime_generics_2004_2006.pdf.
 
Bae JP.  Drug patent expirations and the speed of generic entry. Health Serv Res. 1997; 32:87-101. PubMed
 
U.S. Food and Drug Administration.  New FDA Initiative on “Improving Access to Generic Drugs.” June 11, 2003. Available athttp://www.fda.gov/oc/initiatives/generics/whitepaper.html.
 

Figures

Tables

Table Jump PlaceholderTable 1.  Characteristics of Adults Using at Least 1 Multisource Drug, 1997–2000
Table Jump PlaceholderTable 2.  Characteristics of Multisource Prescriptions Dispensed to Adults
Table Jump PlaceholderTable 3.  Potential Per Person Annual Savings in Total Drug Expenditures Associated with Switching from Brand-Name to Generic Formulation, 2000

References

Henry J.  Kaiser Family Foundation. Prescription Drug Trends. Menlo Park, CA: Henry J. Kaiser Family Foundation; May2003.
 
Moon M.  How Beneficiaries Fare under the New Medicare Drug Bill. The Commonwealth Fund. June 2004. Available athttp://www.cmwf.org/usr_doc/moon_medicarerxdrug_ib_730.pdf.
 
.  Prescription Drug Trends—A Chartbook Update. Menlo Park, CA: Henry J. Kaiser Family Foundation; 2001.
 
Nightingale SL.  From the Food and Drug Administration. JAMA. 1998; 279:645. PubMed
 
Dong BJ, Hauck WW, Gambertoglio JG, Gee L, White JR, Bubp JL. et al.  Bioequivalence of generic and brand-name levothyroxine products in the treatment of hypothyroidism. JAMA. 1997; 277:1205-13. PubMed
 
Rennie D.  Thyroid storm [Editorial]. JAMA. 1997; 277:1238-43. PubMed
 
DeCara JM, Croze S, Falk RH.  Generic warfarin: a cost-effective alternative to brand-name drug or a clinical wild card? [Editorial]. Chest. 1998; 113:261-3. PubMed
 
National Institute for Health Care Management Foundation.  A Primer: Generic Drugs, Patents and the Pharmaceutical Marketplace. June 2002. Available athttp://www.nihcm.org/GenericsPrimer.pdf.
 
Gaither CA, Kirking DM, Ascione FJ, Welage LS.  Consumers' views on generic medications. J Am Pharm Assoc. 2001; 41:729-36.
 
Brennan TA, Lee TH.  Allergic to generics. Ann Intern Med. 2004; 141:126-30. PubMed
 
Hellerstein JK.  The importance of the physician in the generic versus trade-name prescription decision. Rand J Econ. 1998; 29:108-36. PubMed
 
Banahan BF 3rd, Kolassa EM.  A physician survey on generic drugs and substitution of critical dose medications. Arch Intern Med. 1997; 157:2080-8. PubMed
 
Mott DA, Cline RR.  Exploring generic drug use behavior: the role of prescribers and pharmacists in the opportunity for generic drug use and generic substitution. Med Care. 2002; 40:662-74. PubMed
 
Suh DC.  Trends of generic substitution in community pharmacies. Pharm World Sci. 1999; 21:260-5. PubMed
 
Ganther JM, Kreling DH.  Consumer perceptions of risk and required cost savings for generic prescription drugs. J Am Pharm Assoc (Wash). 2000; 40:378-83. PubMed
 
Fischer MA, Avorn J.  Economic consequences of underuse of generic drugs: evidence from Medicaid and implications for prescription drug benefit plans. Health Serv Res. 2003; 38:1051-63. PubMed
 
Cohen JW, Monheit AC, Beauregard KM, Cohen SB, Lefkowitz DC, Potter DE. et al.  The Medical Expenditure Panel Survey: a national health information resource. Inquiry. 1996; 33:373-89. PubMed
 
Cohen SB, DiGaetano R, Goskel H.  Estimation Procedures in the 1996 Medical Expenditures Panel Survey Household Component. Rockville, MD: Agency for Health Care Policy and Research; 1999. MEPS Methodology Report No. 5. AHCPR Pub. No. 99-0027. Available athttp://www.meps.ahrq.gov/papers/mr5_99-0027/mr5.htm.
 
Moeller JF, Stagnitti MN, Horan E, Ward P, Kieffer N, Hock E.  Outpatient Prescription Drugs: Data Collection and Editing in the 1996 Medical Expenditure Panel Survey (HC-010A). Rockville, MD: Agency for Healthcare Research and Quality; 2001. MEPS Methodology Report No. 12. AHRQ Pub. No. 01-0002. Available athttp://www.meps.ahrq.gov/PAPERS/mr12_01-0002/mr12.htm.
 
Cubanski J, Frank RG, Epstein AM.  Savings from drug discount cards: relief for Medicare beneficiaries? Health Aff (Millwood). 2004; W4:198-209. PubMed
 
Anderson GF, Shea DG, Hussey PS, Keyhani S, Zephrin L.  MarketWatch: Doughnut holes and price controls. Health Aff (Millwood). 2004; W4:396-404. PubMed
 
Murphy JE.  Generic substitution and optimal patient care [Editorial]. Arch Intern Med. 1999; 159:429-33. PubMed
 
Harris G.  Bush to back measures on generic drugs. New York Times. 12 June 2003:1.
 
Cruickshank JM.  The cases for and against prescribing generic drugs: don't take innovative research based pharmaceutical companies for granted. BMJ. 1988; 297:1597-8. PubMed
 
The Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured. Medicaid and Managed Care. December 2001. Available athttp://www.kff.org/medicaid/206803-index.cfm.
 
Huskamp HA, Deverka PA, Epstein AM, Epstein RS, McGuigan KA, Frank RG.  The effect of incentive-based formularies on prescription-drug utilization and spending. N Engl J Med. 2003; 349:2224-32. PubMed
 
Schneeweiss S, Dormuth C, Grootendorst P, Soumerai SB, Maclure M.  Net health plan savings from reference pricing for angiotensin-converting enzyme inhibitors in elderly British Columbia residents. Med Care. 2004; 42:653-60. PubMed
 
Robinson AR, Hohmann KB, Rifkin JI, Topp D, Gilroy CM, Pickard JA. et al.  Direct-to-consumer pharmaceutical advertising: physician and public opinion and potential effects on the physician-patient relationship. Arch Intern Med. 2004; 164:427-32. PubMed
 
Schneeweiss S, Walker AM, Glynn RJ, Maclure M, Dormuth C, Soumerai SB.  Outcomes of reference pricing for angiotensin-converting-enzyme inhibitors. N Engl J Med. 2002; 346:822-9. PubMed
 
Goldman DP, Joyce GF, Escarce JJ, Pace JE, Solomon MD, Laouri M. et al.  Pharmacy benefits and the use of drugs by the chronically ill. JAMA. 2004; 291:2344-50. PubMed
 
.  Drug and formulary trends. Formulary. 2002; 38:499.
 
Medco Health Solutions, Inc. Anticipated First-Time Generics, 2004-2006. Available athttp://www.medco.com/art/corporate/firsttime_generics_2004_2006.pdf.
 
Bae JP.  Drug patent expirations and the speed of generic entry. Health Serv Res. 1997; 32:87-101. PubMed
 
U.S. Food and Drug Administration.  New FDA Initiative on “Improving Access to Generic Drugs.” June 11, 2003. Available athttp://www.fda.gov/oc/initiatives/generics/whitepaper.html.
 

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Comments

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Are generic-drugs so cost-effective ?
Posted on June 16, 2005
Marie-Laure LAROCHE
Pharmacologie - Hôpital Dupuytren - Limoges - France
Conflict of Interest: None Declared

We read with interest the paper of Haas et al on the benefits of substituting generic drugs for brand-name drugs. We agree with most of the authors' statements. However we would like to stress the following points:

The authors assume both the quality and the composition of generic and brand-name drugs are equivalent. From our pharmacovigilance experience in France and in Mauritania we do not think this could apply everywhere.

· Poor quality of generics could have obvious consequences when the chronic treatment of a serious condition such as epilepsy is at stake (1).

· Excipients found in generics but not in brand-name drugs such as macrogol, starch, indigotine, carmine indigo or povidone can induce cutaneous allergic reactions.

· The change in excipient content when shifting from a brand-name to a generic drug may modify and most of the time reduce bioavailability. With such substitutions, we observed : hyperglycemia with gliclazide, blood pressure increase with diltiazem and verapamil.

If a generic-linked adverse reaction occurs, hospitalisation may ensue, a correcting treatment may be needed, and a return towards the brand-name drug is often the only way to continue the treatment safely. All these situations might induce an extra cost.

Two other costly situations should be mentioned :

- Some pharmacists would at times mistakenly substitute an immediate release generic for a slow-release brand-name drug. We experienced such a case with mebeverine which induced a vascular collapse.

- In the elderly specially, compliance which is usually poor is depressed by every impeding factor and in particular by any change in the drug they were used to. Substitution might be poorly understood which could lead to overlapping of generic and brand-name drugs and so to toxicity, or to interruption of the treatment (2).

All these changes which could potentially induce adverse effects generate costs up to now widely unevaluated. So the benefit drawn from generic-drug use although indisputable might be lower than is usually considered.

1. Laroche ML, Traore H, Merle L, Gaulier JM, Viana M, Preux PM. Quality of phenobarbital solid-dosage forms in the urban community of Nouakchott (Mauritania). Epilepsia 2005; 46 (8): 1-4.

2. Merle L, Laroche ML, Dantoine T, Charmes JP. Predicting and preventing adverse drug reactions in the very old. Drugs Aging 2005; 22: 375-92.

Conflict of Interest:

None declared

In response to Dr. Laroche
Posted on July 19, 2005
Jennifer S. Haas
Brigham and Women's Hospital, Harvard Medical School, Boston, MA
Conflict of Interest: None Declared

Dr. Laroche raises several issues about the potential risks of switching to a generic formulation. We agree that a generic drug may have different inactive ingredients, such as coloring agents, than the branded product. Uncommonly, an inactive ingredient may cause an allergic reaction. This is true for brand name drugs as well generics. In reviewing the literature, we found only a handful of case reports about allergic reactions to inactive ingredients, most commonly coloring agents.

In the United States, generic formulations are examined and approved by the Food and Drug Administration (FDA) as being bioequivalent to a brand-name drug in safety, strength, and quality [1, 2]. We cannot speak to the generalizability of our findings to other countries, which likely have different utilization patterns of both brand name and generic products.

We agree that errors in drug dispensing are common and costly [3], but we know of no literature that suggests that they are more commonly associated with generic products. We believe that health care professionals, including physicians and pharmacists, should inform all patients about generic substitution to avoid interruptions in treatment or over-use and monitor patients with chronic conditions. We do not believe that these issues would result in substantial change in the potential savings in drug expenditures associated with widespread generic substitution in the United States.

1. Nightingale SL. From the Food and Drug Administration. JAMA. 1998;279(9):645. 2. (National Institute for Health Care Management Foundation). A Primer: Generic Drugs, Patents and the Pharmaceutical Marketplace. 2002. 3. Gandhi TK, Weingart SN, Borus J, et al. Adverse drug events in ambulatory care. N Engl J Med. 2003;348(16):1556-64.

Conflict of Interest:

None declared

Substituting Brand Name Levothyroxine Preparations with Generics Would Increase Treatment Costs
Posted on July 21, 2005
Joshua D. Safer
Boston University School of Medicine, Boston, MA
Conflict of Interest: None Declared

Dear Editor,

Haas, et al. (1) make a provocative point about potential financial savings with broader prescribing of generic pharmaceuticals. However, a blanket policy of generic prescribing would result in increased costs when dealing with agents with narrow therapeutic indexes such as levothyroxine.

Haas, et al. calculate that the annual savings from preferential use of generic levothyroxine in the United States would be 10 million dollars. This represents less than 1/10 of 1% of the total savings achieved with generic substitution of non-narrow therapeutic index drugs where therapeutic monitoring after substitution is unlikely to be a concern.

Haas et al. fail to consider the increased costs associated with re- evaluating and re-titrating the tightly dosed levothyroxine patients as recommended by the Endocrine Society, American Thyroid Association and American Association of Clinical Endocrinologists . Despite recent efforts, thyroid hormone preparations from different manufacturers are not interchangeable. Differences in bioavailability of up to 12.5% have been documented between preparations designated therapeutically equivalent (2). In a retrospective study of well controlled thyroid hormone replacement patients changed from one product to another, more than 25% of the patients required a new dose of levothyroxine with the new manufacture's version of the product (2).

There are 89.7 million levothyroxine prescriptions written annually, representing approximately 7 million patients (3). If each patient received a product change only once annually and 25% required dose changes, at least 1.9 million patients would be inappropriately treated until the next medical exam. At the next exam, the 1.9 million patients would require dose changes followed by blood testing to confirm the appropriateness of the new dose and then repeat interactions with the prescribing physicians for clinical review.

At Boston Medical Center, the additional retail charge for this process would be $562 per patient. If the actual reimbursement is estimated to be 60% of the retail charge, the total annual cost of the additional titration would come to 640 million dollars. The cost does not take into account harm that may befall patients until their inappropriate doses are discovered (e.g. the hospitalization of vulnerable cardiac patients whose doses become too high).

Although there may be savings achieved with greater use of generic pharmaceuticals in many instances, there must be a separate plan for pharmaceuticals with narrow therapeutic ranges, like levothyroxine. Were the logic of Haas et al applied, the impact on thyroid hormone replacement would be to increase costs significantly.

References:

1. Haas JS, Phillips KA, Gerstenberger EP, Seger AC. Annals of Internal Medicine. 2005;142:891-897.

2. Public Meeting for Levothyroxine Sodium Therapeutic Equivalence, May 23, 2005, Washington, DC. Available at http://www.fda.gov/cder/meeting/ levothyroxinePresentations.htm.

3. IMS National Prescription Audit, March, 2005. Available at http:// www.asapnet.org/Long_ASAPJune05.ppt.

Conflict of Interest:

None declared

No Title
Posted on July 22, 2005
MORTON H. FIELD
N/A
Conflict of Interest: None Declared

To The Editor,

The article by Haas, et al1 begins an interesting dialogue concerning the pharmaceutical industry in the U.S. As salutary and informative as their article is, they have omitted an important cost aspect of drugs in this country"”the effect of counterfeit drugs on health expenditures.

Estimates of counterfeit drugs in the U.S. suggest that 7% of all drugs consumed are not as labeled. This is true of all drug sources and outlets"”Internet, retail pharmacies and mail order houses. "Counterfeit" includes repackaged drugs with incorrect contents by virtue of dishonest repackaging, substituting an incorrect drug, a correct drug with a dosage different from that stated, and out-dated drugs repackaged with different expiration dates.

I have encountered substitutions that resulted in significant and dangerous changes in patient stability with thyroid, diabetic and cardiac drugs. These substitutions force me to monitor much more closely the drug effects in a patient using generics. This monitoring requires frequent blood level checks and assessment of the drug's effectiveness. Occasionally a hospitalization results from drug "failure" often blamed on patient "non-compliance". Faulty accusations can result in a serious breach in physician-patient trust if a counterfeit drug problem is not suspected.

The occurrence of "counterfeit drugs" can be traced, in part, to the FDA's refusal to require "provenance" in the "paper trail" of pharmaceuticals from manufacture to dispensing.

In my experience these costs are a factor of 10 to 100 times the purported savings of $45.00 ($78.00 Medicare ) per patient per year.

Morton H. Field, MD, FACP

1 Haas, Phillips, Gerstenberger and Seger. Potential Savings from Substituting Generic Drugs for Brand Name Drugs. Annals of Internal Medicine, 2005:142: 891-897

Conflict of Interest:

None declared

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Summary for Patients

Potential Savings with Substitution of Generic Drugs for Brand-Name Drugs

The summary below is from the full report titled “Potential Savings from Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997–2000.” It is in the 7 June 2005 issue of Annals of Internal Medicine (volume 142, pages 891-897). The authors are J.S. Haas, K.A. Phillips, E.P. Gerstenberger, and A.C. Seger.

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