Generic Drugs Savings? Orrin not so Oral

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  • 03/05/2012

Generic Drugs' Effect on Health Costs Unclear, GAO Says

By Emily P. Walker, Washington Correspondent, MedPage Today

WASHINGTON -- Generic drugs were substituted for brand-name drugs 93% of the time in 2010, but whether increased use of generics is actually saving money is up for debate, according to the Government Accountability Office (GAO).

Studies looking at cost savings from use of generic drugs "had mixed results regarding the effect of using these generics, in that some found they raised healthcare costs, while others found they led to cost savings," wrote the authors of a GAO report released Thursday.

The GAO report was requested by Sen. Orrin Hatch, co-author of the 1984 Hatch-Waxman Act, which paved the way for a major increase in the number of generic drugs. In the early 1980s, there were generic versions of just 35% of the top-selling drugs with expired patents; by the late 1990s, almost all of them had generic versions.

Prescription drug spending more than tripled from 2001 and topped $307 billion in 2010, making up 12% of all healthcare spending in the country, the GAO researchers wrote.

However, the growth has slowed markedly since the early 2000s when an increasing number of generic versions of brand-name drugs hit the market. On average, the retail price of a generic drug is 75% less than the retail price of its brand-name equivalent.

The report summarized the findings of peer-reviewed articles, government reports, and studies by national organizations -- including trade and nonprofit organizations -- on the cost effects of increased utilization of generic drugs.

The report authors identified three general groups of studies. The first group estimated the cost savings from relying more on generic drugs. One group of studies in that pool -- sponsored by the generic drug lobby -- estimated the use of generics to have saved the U.S. healthcare system $1 trillion from 1999 through 2010.

Another report, by the Congressional Budget Office (CBO), found that dispensing generic drugs rather than their brand-name counterparts reduced total Part D prescription drug costs in 2007 by about $33 billion.

A second group of reports focused on the potential to save even more through greater use of generics. For instance, the CBO estimated that if generics had always been substituted for brand-name drugs in Medicare Part D, $900 million would have been saved in 2007.

A third group of studies estimated the effect on healthcare costs of using certain generic drugs in cases where questions have been raised about how medically similar they are to the brand-name version. That group of studies compared the lower cost of the drug with the higher cost of increased hospitalizations from using a potentially less effective generic drug.

One study in that group found that depressed patients on selective serotonin reuptake inhibitors (SSRIs) who started on a brand-name SSRI and switched to a generic ended up experiencing an increase of $881 in total healthcare costs because of increased hospitalization rates and emergency department visits.

However, another study found those who began treatment on generic SSRI's had significantly lower costs than patients using brand-name antidepressants.

Another study in that group, done among renal transplant patients, found that total healthcare costs one year following transplantation were about $4,000 higher for patients who started therapy with generic immunosuppressants compared with those using brand-name drugs. That difference was attributed to "the cost associated with needing higher doses of the generic drug or additional immunosuppressants needed to maintain the transplanted kidney in patients using the generic," the report said.

Overall, the studies on whether generic drugs save money were a mixed bag, the GAO said.

Generic drugs must have the same active ingredients, route of administration, strength, and intended use as their brand-name counterparts. They also must be absorbed into the bloodstream at the same rate. Generic drugs are allowed to have different inactive ingredients, such as binding materials, dyes, preservatives, or flavoring agents compared with brand-name drugs.

At the end of the GAO report to Hatch, which was dated Jan. 31, the agency mentioned that it agreed not to publish the results of the report for 30 days. In the meantime, Hatch could have publicized the results, but did not. Requests for comment from Hatch's office did not bring a response.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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