Generic Drugs Are Saving Money for Seniors in Medicare Part D

Published February 1, 2008

The use of generic medicines is bringing down costs in Medicare’s Part D prescription drug program, and Congress is considering a proposal to require pharmacies to use generics unless a doctor can prove brand-name drugs are medically necessary.

But analysts suggest the law might not be needed, because pharmacies already use generics whenever possible.

A November 14 report by the U.S. Department of Health and Human Services’ Office of the Inspector General on the use of generic medicines in Medicare’s Part D prescription drug program showed significant cost savings.

Previous estimates had projected the program would cost the federal government $59 billion in 2006, the first year of the Part D program. The report notes costs in 2006 were an unexpectedly low $47 billion.

Generic drugs cost up to 71 percent less than their brand-name counterparts. According to the report, whenever generic equivalents to brand-name drugs were available, they were prescribed 88 percent of the time. Of all Part D prescriptions, 56 percent were filled with generic drugs.

Thirty-seven percent of prescription drugs used by Part D beneficiaries do not have a generic substitute.

Promise of Generics

Sen. Herb Kohl (D-WI), chairman of the Senate Special Committee on Aging, requested the report on use of generic drugs in January 2006.

“Generics, which cost a fraction of their brand-name counterparts, are a big part of the solution to health care costs that are spiraling out of control,” Kohl stated in a November 14 news release. “When generic drugs are dispensed under Medicare Part D, it’s a win-win for America’s seniors and for the federal budget.”

Kohl stated, “This report is promising, but there is more to be done to make sure affordable generic drugs are made available whenever possible to our seniors.”

In January 2006, Kohl introduced the Generics First Act (S. 28), which would require all Part D prescriptions to be filled with a generic drug unless a doctor determines the brand medication is medically necessary. At press time, the bill was still pending.

Problem with Legislation

But some argue a generic-drugs mandate is no cure-all for high prices.

“Given that standard procedure at nearly all pharmacies already involves substituting generics, it seems unlikely this will produce significant savings for anyone,” said Eli Lehrer, a senior fellow at the Competitive Enterprise Institute. “It really just affirms the status quo and may create a lot of unnecessary paperwork.”

Karina Rollins ([email protected]) is a writer in Washington, DC.

For more information …

“Generic Drug Utilization in the Medicare Part D Program,” Department of Health and Human Services, November 14, 2007: