Generic Drugs Could Have Saved $20 Billion in Health Care Costs

NEW YORK – Consumers, their employers and health plans in the commercial market could have saved more than $20 billion last year through increased use of generic drugs (search), according to a new report by Express Scripts Inc., a pharmacy benefit manager.

The study examined six major classes of drugs including antidepressants (search) and cholesterol-lowering medications (search) and was based on a sample of roughly 3 million Express Scripts commercial members. Government programs such as Medicaid, the health plan for the poor, were not included in the study.

Express Scripts estimates that if more actions aren't taken to increase generic use, $24 billion in saving will be lost this year and $25 billion will be left on the table in 2006. It said that on average a generic drug costs about $60 less per monthly prescription than a brand name medicine. Consumers also pay lower copayments for generics, saving $10 or more per prescription by forgoing a brand name medicine.

Pharmacy benefit managers administer drug plans and organize the purchase, dispensing and reimbursement of medicines for health insurers or other large purchasers of health care such as employers and unions. Express Scripts does earn more money from its clients if it lowers their drug costs.

"We promote generics only when their use is clinically appropriate," Express Scripts said in a statement. "Our mission is to make the use of prescription drugs safer and more affordable. Generic drugs, because they are tried and true and less expensive, help us fulfill both the safety and affordability parts of this mission."

As health care costs have continued to rise, health plans have been giving consumers inducements to use generic drugs through offering lower co-payments on such medicines. That has increased the use of generic drugs — about 50 percent of prescriptions dispensed now are for non-brand products — but Express Scripts believes more can be done to save money.

Dr. Steve Miller, Express Scripts Vice President of Research, said that many people still don't feel comfortable asking their doctor about generic alternatives to brand name drugs.

"Patients need to be empowered to ask the question," Miller said.

Miller added that drug advertisements reinforce a brand's name and image to the consumer. He also noted that doctors have no incentive to write generic drug prescriptions, especially when they receive samples and other perks from pharmaceutical companies.

The most dramatic savings potential exists for generic gastrointestinal drugs, which treat problems like acid reflux disease (search), where costs could fall $5.4 billion nationally. The study found that generic gastrointestinal drugs are only dispensed 31 percent of the time but a generic alternative would be appropriate in 95 percent of cases.

Miller said patients only need newer, stronger branded products like AstraZeneca's PLC Nexium 5 percent of the time. AstraZeneca spokeswoman Cynthia Callaghan said price shouldn't be the deciding factor in choosing a treatment.

"We really intend that patents and doctors work together to determine the best treatment," Callaghan said.

The potential for savings will increase as more than $50 billion worth of branded drugs will lose patent protection in the next five years. Next year, $11 billion in drug sales are expected to lose protection as 15 branded products face generic competition, including Merck & Co.'s cholesterol-lowering drug Zocor. Express Scripts has already said next year it will take Pfizer Inc.'s rival product Lipitor off its preferred list, meaning it will have a higher copayment for consumers, in the hopes of convincing more people to take generic Zocor.

Pfizer has previously said it believes the vast amount of clinical data it has accumulated supporting Lipitor's effectiveness will keep sales strong.

In a statement, the Pharmaceutical Research and Manufacturers of America, the brand drug industry's trade group, said the report goes beyond the company calling merely for generic substitution.

"Much of the increase in generic drug use advocated by Express Scripts involves switching patients to medicines different from those prescribed by their physicians. They are not generic copies of the prescribed treatments," said Ken Johnson, senior vice president of the trade group. "Patients differ from one another, as do medicines in a therapeutic class. It is important that the patient and his or her physician determine which medicine is right for the patient."