The Switch to Generic Drugs could save Medicare Billions….Sort of

June 17, 2013

Medicare is constantly aiming to keep spending in line. A new study shows that making the change from expensive brand-name drugs to their generic counterpart could save Medicare billions. 

A new Annals of Internal Medicine report shows that Medicare enrollees are three times more likely than VA benefit recipients to choose brand-name drugs over generic, in part because the VA requires that patients try the generic option before switching to brand-name. All VA prescriptions are managed by the same pharmacy company and patients typically only get a branded version if there’s no close generic equivalent.

Outside of the VA, most doctors are inclined to prescribe brand-name drugs unless the patient asks otherwise. Meanwhile, many patients worry that generic versions of their medication won’t be as effective as their branded ones.

But the cost of generic drugs, while cheaper than brand-name, have their own pricing problems. Similar to the wild disparity between hospital procedures, generic drug costs fluctuate depending on location and pharmacy. For example, a 90-day supply of the generic equivalent of the cholesterol drug Zocor cost $51.99 at Safeway, $62.97 at Walgreens, $75.99 at Target, $122.99 at CVS, but just $9.99 at Costco. Not only are generic drug prices inflated depending on your pharmacy, getting information on what your insurance will cover at a new pharmacy proves difficult.

If Medicare Part D operated in the same way as the VA system, it would have saved $1.4 billion in prescription drug costs in 2008. CMS would do well to follow the VA’s example and encourage doctors and Medicare beneficiaries to try generic drugs first. And while choosing generic could save Medicare billions, more price transparency for generic drug options could also save big bucks for consumers.

Sources:

http://www.washingtonpost.com/national/health-science/study-brand-name-drugs-drive-up-medicare-spending/2013/06/11/a4a050a8-d288-11e2-b3a2-3bf5eb37b9d0_story.html

http://articles.latimes.com/2013/jun/11/business/la-fi-lazarus-20130611

 

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