Medicaid clients are among the most at-risk members of society for poor health outcomes and Medicaid coverage is a critical safety net for assuring continuous access to medical care. It obviates the consumption of billions of public dollars subsidizing the healthcare bills for crisis care for the otherwise uninsured poor.

Watanabe and co-authors studied the importance of curtailing unnecessary drug spending as well as generics utilization mechanisms already applied by payers. They also described the historic opportunity to reduce drug spending due to the recent patent losses of manifold blockbuster medications. The stimulation of a robust and safe generics marketplace in the US via the Drug Price Competition and Patent Term Restoration Act was explored. Finally, the positive implications for patient medication adherence with generics use completed the review.

One in every five Americans receives healthcare coverage through Medicaid. It is the largest health insurance programme in the US with the Centers for Medicare and Medicaid Services ranking as the most expensive public health insurance programme in the world. Medicaid covers 31 million low income children and finances 40% of all US child births. Medicaid is a foundational societal support system both now and for the future caretakers of the US.

While brand-name medications represent only 31% of prescriptions dispensed, their utilization accounts for 84% of total drug spending in the US. According to the National Association of Chain Drugstores, the average retail price for a brand-name drug was US$96.01. The average retail price of a generic drug was US$28.74 – a saving of nearly 70% per prescription. An Office of Inspector General (OIG) report found a similar pattern within the state Medicaid system with generics prices 61% less expensive than brand-name drugs.

The last few years have seen an acceleration in the availability of first-line medication options due to virtually simultaneous patent losses of brand-name medications. Aricept (donepezil), Lipitor (atorvastatin), Plavix (clopidogrel), Seroquel (quetiapine), Zocor (simvastatin) and Zyprexa (olanzapine) make up a truncated list of medications with individual annual sales of greater than US$1 billion per year that lost patent protection by the close of 2012.

The number one and two highest revenue generating medications in that year, Lipitor and Plavix, represented more than US$13 billion in annual sales combined during their patent protected phase. An IMS report described US$734 billion in savings due to generics from 1999−2008 with US$121 billion in savings in 2008 alone.

Profound cost reductions for chronic syndromes are attainable based on scenario analyses of clinical guidelines-based generics substitution. A well-publicized cost-effectiveness study of hypertension control medications for non-diabetic patients estimated it would require US$52,983 to gain an additional quality adjusted life year (QALY) versus no treatment. When this analysis was repeated substituting available generics for brand-name medications the dollars per QALY dropped from US$52,983 to US$7,753. Given the traditional range of US$50,000 to US$100,000 per QALY deemed ‘cost-effective’, chronic care with generics is surpassingly cost-effective. Importantly, the reduced co-payments charged for generics have been tied to improved medication adherence. Medication adherence elevations have been correlated to improve clinical endpoints.

The authors therefore concluded that generics utilization policies are a necessary component for preservation of the Medicaid system and the 60 million lives that rely on safety net health care to lead productive lives. Given the tenuous fiscal climate and the wealth of first-line generics now marketed, reckless spending on brand-name drugs is indefensible.

Conflict of interest
The authors of the research paper [1] declared that there were no conflicts of interest and that the work received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

Abstracted by Assistant Professor Jonathan H Watanabe, PharmD, PhD, Skaggs School of Pharmacy and Pharmaceutical Sciences, University of California, San Diego, USA.

Editor’s comment
Readers interested to learn more about generics utilization policies are invited to visit www.gabi-journal.net to view the following manuscripts published in GaBI Journal:

The impact of pharmaceutical pricing and reimbursement policies on generics uptake: implementation of policy options on generics in 29 European countries─an overview

European payer initiatives to reduce prescribing costs through use of generics

Readers interested in contributing a research or perspective paper to GaBI Journal – an independent, peer reviewed academic journal platform – please send us your submission here.

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Reference
1.  Watanabe JH, Hazlet TK, Sullivan SD. Generic medication utilization policies in the United States and Medicaid sustainability. J Pharm Health Serv Res. 2015;6(1):3-10.

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