The National Community Pharmacists Association hailed a new report showing the savings that increased generic drug use can yield for Medicaid.

National Community Pharmacists Association, NCPA, Kathleen Jaeger, American Enterprise Institute for Public Policy Research, generic drug use, generic drug utilization, prescription drugs, Medicaid, brand-name prescription drugs, generic drug substitution, Medicaid costs, Alex Brill, multisource drugs, Overspending on Multi-Source Drugs in Medicaid

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NCPA: Report flags Medicaid overspending on Rx

April 1st, 2011

ALEXANDRIA, Va. – The National Community Pharmacists Association hailed a new report showing the savings that increased generic drug use can yield for Medicaid.

Released this week by the think tank American Enterprise Institute for Public Policy Research, the study found that in 2009 the Medicaid program overspent by more than 20% for 20 popular multisource drugs by reimbursing for more expensive brand-name prescription drugs instead of cheaper generic alternatives.

"As the new AEI report states, generic medicines can help reduce overall Medicaid costs. As community pharmacists, we see this every day as we work to help patients afford the critical medicines they need," Kathleen Jaeger, NCPA executive vice president and chief executive officer, said in a statement on the study.

Jaeger noted that according to IMS Health, every 2% increase in generic drug utilization in Medicaid saves taxpayers an additional $1 billion annually. "Community pharmacies are leading the way in consistently dispensing generic drugs. In fact, we dispense them more often than other practice settings, such as mail order pharmacies," she commented.

In addition, Jaeger stated, the AEI analysis cited Massachusetts as a pioneer state in boosting generic drug use. The Massachusetts fee-for-service Medicaid program has a generic dispensing rate of 79.3%, a rate which could save $5.14 billion nationally if each state achieved a similar Medicaid generic drug substitution, she explained.

"Independent community pharmacists play a key role in the Medicaid prescription drug benefit. We are trusted providers of affordable, quality care to many patients in underserved rural and urban areas where there may be few, if any, other accessible options," Jaeger added. "Community pharmacists stand ready to work with federal and state Medicaid officials seeking to maintain vital health services in the face of significant budget shortfalls."

Key findings of the AEI report — titled "Overspending on Multi-Source Drugs in Medicaid" and authored by Alex Brill —  include the following:

• Among 20 popular multisource drugs, Medicaid overspent by an estimated $329 million in 2009 by reimbursing for more costly brand drugs rather than lower‐cost, therapeutically equivalent generics. Since total spending on the medications was about $1.5 billion, that means Medicaid overspent by 22% ($1.5 billion versus $1.17 billion) on those products.

• Among the 20 drugs studied, Medicaid wasted an average of $95 per prescription.

• 85% of the overspending was concentrated in eight identified chemical compounds. The total waste for those drugs was about $279 million.

• On the state level, the greatest amount of unnecessary spending was in California ($102 million), Texas ($31 million), Georgia ($25 million) and Ohio ($21 million). Per Medicaid enrollee, the most wasteful states were Vermont and Iowa ($31 per enrollee in each state), Maine ($18 per enrollee) and New Hampshire ($17 per enrollee).

• 10 branded drugs are slated to lose patent protection in 2011 and 2012 for which Medicaid reimbursement levels were very high in 2009. Projections of overspending on these drugs, assuming generic utilization patterns comparable to what was observed in 2009 for products with generic equivalents introduced in 2007 or 2008, range from $289 million to $433 million.

"The results show that, in 2009, states' Medicaid programs engaged in a large amount of unnecessary drug spending by reimbursing pharmacies for relatively costly brand products when alternative products with identical active ingredients were available at a lower cost," AEI stated in the report. "Specifically, the analysis identifies $329 million of overspending as a result of underutilization of the less costly (generic) and overutilization of the more costly (brand) versions of these multi‐source products. Because Medicaid is a joint federal/state program, savings from addressing this problem would accrue to both states and the federal government, although the federal share of total Medicaid spending is generally about 57%."

AEI also noted in its analysis, "The approach of a significant 'patent cliff,' when many blockbuster brand drugs will begin to face generic competition upon losing patent protection in 2011 and 2012, makes the likely future overspending in this program even greater if new policies are not promptly adopted."