Generic Drug Utilization in the Medicare Part D Program

Effective January 1, 2006, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 made qualified prescription drug coverage under Medicare Part D (Part D) available to all individuals entitled to benefits under Medicare Part A or enrolled in Medicare Part B. Beneficiaries generally have the option to enroll in either stand-alone prescription drug plans (PDP) or Medicare Advantage prescription drug plans (MA-PD). Under Part D, plans have broad discretion to design plan benefits and develop their drug utilization management tools.

According to the Medicare Board of Trustees, Part D cost the Federal Government $47 billion in 2006. The cost of the Part D prescription drug program for 2006 was lower than the original estimate of $59 billion, and future cost estimates have also been reduced, due in part to greater than anticipated generic drug use. Generic drugs cost, on average, 71 percent less than brand name drugs.