oversight

Drug Pricing: Research on Savings from Generic Drug Use

Published by the Government Accountability Office on 2012-01-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States Government Accountability Office
Washington, DC 20548



           January 31, 2012
           The Honorable Orrin G. Hatch
           Ranking Member
           Committee on Finance
           United States Senate
           Subject: Drug Pricing: Research on Savings from Generic Drug Use
           Dear Senator Hatch:
           Prescription drug spending in the United States reached $307 billion in 2010—an
           increase of $135 billion since 2001— 1and comprised approximately 12 percent of all
           health care spending in the country. Until the early 2000s, drug spending was one of
           the fastest growing components of health care spending. However, since that time,
           the rate of increase has generally declined each year, attributable in part to the
           greater use of generic drugs, which are copies of approved brand-name drugs. 2
           Generic versions of brand-name drugs become available to consumers when brand-
           name drugs’ patents and periods of market exclusivity expire and generic
           manufacturers obtain approval to market their drug. 3 The competition that brand-
           name drugs face from generic equivalents is associated with lower overall drug
           prices, particularly as the number of generic manufacturers grows and price
           competition among them increases. 4 On average, the retail price of a generic drug is
           75 percent lower than the retail price of a brand-name drug. 5


           1
            See IMS Institute for Healthcare Informatics, The Use of Medicines in the United States: Review of
           2010 (Parsippany, N.J.: April 2011). For the purposes of this report, we use the terms prescription
           drugs and drugs interchangeably.
           2
            A brand-name drug is a drug marketed under a proprietary, trademark-protected name. For the
           purposes of this report, we use the terms generic drug and generic interchangeably. We also use the
           terms brand-name drug and brand interchangeably.
           3
            Patents are issued by the U.S. Patent and Trademark Office, generally for a term of 20 years from
           the date of filing. A patent grants its owner the right to exclude others from making, using, selling,
           offering to sell, or importing the patented invention into the United States. See 35 U.S.C. § 154(a)(2).
           In the case of drugs, the patent protects the investment in the drug’s development by giving the
           manufacturer the sole right to sell the drug while the patent is in effect.
           4
            While research has shown that generic drug prices decrease relative to the number of generic
           manufacturers that enter the market, research is less clear regarding the overall effect of generic
           entry on brand prices. While some studies have found that the price of a brand-name drug increases
           following generic entry, others have found that generic entry exerts a downward pressure on brand
           prices. In the latter case, while brand-name prices typically increase over time, with generic entry they
           do not increase as much as they would have otherwise.
           5
            Congressional Budget Office (CBO), Effects of Using Generic Drugs on Medicare’s Prescription
           Drug Spending (Washington, D.C.: September 2010).



                                                                GAO-12-371R Savings from Generic Drug Use
Increased use of generic drugs can partly be attributed to the regulatory framework
that was established in the Drug Price Competition and Patent Term Restoration Act
of 1984, commonly known as the Hatch-Waxman Act. 6 The Hatch-Waxman Act
facilitated earlier, and less costly, market entry of generic drugs, while protecting the
patent rights of brand-name drug manufacturers, to encourage continued investment
in research and development. When the act was enacted in 1984, the generic
utilization rate—which is the share of all drugs dispensed that are generic—was
about 19 percent. Today it is about 78 percent for drugs dispensed in retail settings,
such as independent, chain, and mail-order pharmacies, as well as in long-term care
facilities. 7 The generic utilization rate is expected to continue to grow over the next
few years as a number of blockbuster drugs 8 come off patent through 2015.
While the Hatch-Waxman Act has helped to increase the number of generic
alternatives to brand-name drugs, other factors influence whether providers and
consumers use generic drugs. For example, third-party payers—including private
health insurance plans and public programs such as Medicare—9use strategies such
as tiered copayments to encourage the use of less expensive drugs within a
therapeutic class, which are often generics. 10 Also, perceptions of the safety and
efficacy of generic drugs may affect their use. Thus, use of generic drugs—and the
savings realized—can vary by payer as well as across therapeutic classes. You
asked us to identify research completed on estimates of cost savings from the use of
generic drugs in the United States. This report summarizes the findings of peer-
reviewed articles, government reports, and studies by national organizations,
including trade and nonprofit organizations, on this topic. 11
To identify research completed on estimates of cost savings from the use of generic
drugs in the United States, we conducted a structured literature review, which
resulted in 30 articles we determined to be relevant to our objective (see the
enclosure for a list of the articles we identified). To conduct this review, we searched
6
Pub. L. No. 98-417, 98 Stat. 1585 (1984).
7
 In addition to long-term care facilities, prescription drugs can be dispensed in other institutional
settings, such as hospitals and clinics. Complete data on the 2010 generic utilization rate were not
publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail
settings and long-term care facilities comprise approximately 76 percent of all prescription drug
spending in the United States, with drugs dispensed in retail settings accounting for almost all of
these drugs.
8
 Blockbuster drugs are drugs that generate at least $1 billon in revenue per year for the company that
manufactures them. From 2012 through 2015, 13 blockbuster drugs that account for about $78 billion
in drug sales are expected to come off patent, including Plavix (an anti-platelet medication), Seroquel
(an antipsychotic), and Singulair (an asthma medication).
9
 Medicare is the federally financed health insurance program for persons aged 65 or over, certain
individuals with disabilities, and individuals with end-stage renal disease. Medicare covers drugs
dispensed in hospital inpatient settings or skilled nursing facilities through Part A and outpatient
prescription drugs either through Medicare Part B or Part D. Part B covers physician-administered
drugs. Part D, which went into effect in 2006, provides a voluntary outpatient prescription drug benefit
for the Medicare program.
10
  Third-party payers may use a variety of copayment structures. For example, in a common three tier
copayment structure, enrollees pay a low copayment for generic drugs (the first tier), a higher one for
preferred brand-name drugs (the second tier), and the highest copayment for nonpreferred brand-
name drugs (the third tier). A therapeutic class is defined as a group of drugs that are similar in
chemical structure, pharmacological effect, or clinical use.
11
    For the purposes of this report, we use the terms articles, reports, and studies interchangeably.



2                                                     GAO-12-371R Savings from Generic Drug Use
seven reference databases that included peer-reviewed journal articles and other
periodicals to capture articles published on or between January 2000 and
October 24, 2011. 12 We used a combination of search terms related to cost savings
from the use of generic drugs, including synonyms for generic drugs, monetary
terms, and modifiers (see the enclosure for a complete list of the search terms). We
determined whether an article was relevant to our objective based on whether it
included an empirical analysis that produced estimates of cost savings from the use
of generic drugs. We excluded articles that: (1) were not focused on the United
States; (2) were news articles, opinion pieces, or PowerPoint presentations; or
(3) did not describe a methodology for calculating the savings estimates. We also
excluded articles that: (1) included estimates of cost savings involving the use of
generic drugs, but it was unclear whether other factors also contributed to the
savings; 13 (2) analyzed differences in the prices of brand and generic drugs, but did
not look at cost savings for a given population; or (3) focused on estimates of cost
savings from generic versions of biologics. 14 To supplement this information, we
searched government websites, such as the Department of Health and Human
Services’ website, for studies that met our criteria. We also searched the websites of
national organizations, including those of trade groups, such as the Generic
Pharmaceutical Association (GPhA), and nonprofits, such as the Kaiser Family
Foundation. In addition, we searched the Nexis database for trade articles
discussing cost savings from generic drugs using the same search terms as our
review of reference databases. To help ensure our searches captured relevant
articles, we reviewed the bibliographies of the studies we identified as relevant to
identify other potentially relevant articles. We also interviewed officials at the
Congressional Budget Office (CBO), GPhA, and IMS Health 15 about prior work on
estimates of cost savings from the use of generic drugs, and included any additional
reports the officials identified if they met our criteria. We analyzed the 30 articles
identified through our literature review to group them by topic covered and
summarized key methodological similarities and differences within and among the
groups. However, we did not independently assess the methodologies of the
articles, including the reliability of data used.


12
  The databases we searched included those with a medical or economic focus as well as those
including articles across multiple disciplines. They were: MEDLINE, EMBASE, EMCare, EconLit,
NTIS, SciSearch, and Social SciSearch. While we restricted our search to articles published on or
between January 2000 and October 24, 2011, some articles identified were based on data prior to
this time period.
13
  Examples of such articles are those that discussed pharmacy benefit design changes to encourage
generic use, such as the initiation of a three tier copayment structure. In these cases, the articles
were excluded because they did not distinguish whether cost savings estimates resulted from generic
drug use or other factors, such as the use of lower-cost brand-name drugs.
14
  Biologics are products, such as vaccines, derived from living sources, such as humans, animals,
and microorganisms. See 42 U.S.C. § 262(i). Biosimilars—or follow-on versions of biologics—are not
subject to the Hatch-Waxman Act, and there has historically been limited market penetration of these
products. In order to encourage a market for biosimilars, the Patient Protection and Affordable Care
Act (PPACA) established a pathway for approval of biosimilars analogous to the Hatch-Waxman Act,
and the Food and Drug Administration is currently developing regulations to implement the
provisions. See Pub. L. No. 111-148, § 7002, 124 Stat. 119, 804-21 (2010).
15
 IMS Health is an international company that supplies the pharmaceutical and health care industries
with market information.



3                                                  GAO-12-371R Savings from Generic Drug Use
We conducted our work from October 2011 to January 2012 in accordance with all
sections of GAO’s Quality Assurance Framework that are relevant to our objectives.
The framework requires that we plan and perform the engagement to obtain
sufficient and appropriate evidence to meet our stated objectives and to discuss any
limitations in our work. We believe that the information and data obtained, and the
analysis conducted, provide a reasonable basis for any findings and conclusions in
this product. Because we did not evaluate the policies or operations of any federal
agency to develop the information presented in this report, we did not seek
comments from any agency.
Results in Brief
Our review identified articles that used varying approaches to estimate the savings
associated with generic drug use in the United States. One group of studies
estimated the savings in reduced drug costs that have accrued from the use of
generics. For example, a series of studies estimated the total savings that have
accrued to the U.S. health care system from substituting generic drugs for their
brand-name counterparts, and found that from 1999 through 2010 doing so saved
more than $1 trillion. A second group of studies estimated the potential to save more
on drugs through greater use of generics. For example, one study assessed the
potential for additional savings within the Medicare Part D program—which provides
outpatient prescription drug coverage for Medicare—and found that if generic drugs
had always been substituted for the brand-name drugs studied, about $900 million
would have been saved in 2007. A third group of studies estimated the effect on
health care costs of using generic versions of certain types of drugs where questions
had generally been raised about whether substituting generic drugs for brand-name
drugs was medically appropriate. Unlike the other two groups which focused on
savings on drugs only, these studies compared savings from the lower cost of
generic drugs to other health care costs that could accrue from their use, such as
increased hospitalizations. The studies had mixed results regarding the effect of
using these generics in that some found they raised health care costs, while others
found they led to cost savings.
Background
In order to be approved by the U.S. Food and Drug Administration (FDA), generic
drugs must be the same as their brand-name counterparts in the following ways:
they must have the same active ingredient(s); the same route of administration, for
example, a drug that is taken orally versus by injection; the same dosage form, for
example, a pill versus a syrup; the same strength; and the same intended use. 16
Generic drugs also must meet FDA manufacturing standards and be bioequivalent,
meaning that the rate and extent of absorption of generic drugs into the bloodstream
do not show a statistically significant difference from their brand-name counterparts.
However, bioequivalence standards set by FDA allow for variation between brand
and generic drugs that is considered small enough for the drugs to still be
considered interchangeable. Such variation may occur because, for example,
generic drugs may have different inactive ingredients, such as binding materials,
dyes, preservatives, or flavoring agents compared to brand-name drugs.

16
 Active ingredients include any component of a drug that is intended to provide pharmacological
activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease.
See 21 C.F.R. § 210.3(b)(7).


4                                                     GAO-12-371R Savings from Generic Drug Use
Spending on Prescription Drugs
Prescription drug spending consists of payments from third-party payers, including
private health insurance plans and public programs, and of consumers’ out-of-pocket
costs. 17 Most—approximately 76 percent—of drug spending in the United States is
for drugs dispensed in retail settings and long-term care facilities, with drugs
dispensed in retail settings accounting for almost all of these drugs. In 2010, private
health insurance plans paid $117 billion or 45.2 percent of the $259.1 billion spent
on retail prescription drugs. 18 Public programs paid $93.3 billion, accounting for
36 percent, and consumers paid $48.8 billion out of pocket, accounting for
18.8 percent of the spending (see fig. 1).
Figure 1: Spending on Prescription Drugs in Retail Settings by Payer Type, 2010




Note: Prescription drugs can be dispensed in retail settings, such as independent, chain, and mail-order pharmacies, as well as
in institutional settings, such as long-term-care facilities, hospitals, and clinics. Data on drug spending by payer type were not
publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail settings and long-term care
facilities comprise approximately 76 percent of all prescription drug spending in the United States, with drugs dispensed in
retail settings accounting for almost all of these drugs.


Within public programs, federal programs accounted for 90 percent of all spending
on prescription drugs in retail settings, with state and local spending on programs
such as Medicaid accounting for the rest. 19 Medicare was by far the biggest federal
payer, representing 70.8 percent of all federal spending on prescription drugs. (See
table 1 for more information on federal spending on prescription drugs.)




17
 Consumers’ out-of-pocket costs generally include direct spending by consumers for drugs not
covered by third-party payers and cost-sharing, including copayments and deductibles, for drugs
covered by these payers. For the purposes of this report, out-of-pocket costs do not include
consumers’ premium payments for health insurance plans.
18
  Data on prescription drug spending by payer type were not publicly available for drugs dispensed in
institutional settings.
19
  Medicaid is a joint federal-state program that finances health care for certain categories of low-
income individuals. Medicaid programs vary from state to state. Federal spending on prescription
drugs includes the federal share of the cost of prescription drugs for Medicaid beneficiaries.



5                                                                GAO-12-371R Savings from Generic Drug Use
Table 1: Federal Spending on Prescription Drugs in Retail Settings, 2010

    Payer                                                         Total spending (in billions)                Percent of federal
    Medicare                                                                                        $59.5                70.8%
              a
    Medicaid                                                                                         14.8                   17.6
    Department of Defense                                                                              6.1                   7.3
    Department of Veterans Affairs                                                                     2.6                   3.1
                                  b
    Other federal spending                                                                             1.0                   1.2
    Total                                                                                             $84                 100%
Source: GAO analysis of the Centers for Medicare & Medicaid Services’ National Health Expenditure Accounts.

Note: Prescription drugs can be dispensed in retail settings, such as independent, chain, and mail-order pharmacies, as well as
in institutional settings, such as long-term-care facilities, hospitals, and clinics. Data on drug spending by payer type were not
publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail settings and long-term care
facilities comprise approximately 76 percent of all prescription drug spending in the United States, with drugs dispensed in
retail settings accounting for almost all of these drugs.
a
 Includes federal spending through Medicaid and the Children’s Health Insurance Program.
b
 Includes federal spending by the Indian Health Service and through the Maternal and Child Health program. Also, includes
spending through workers compensation programs, which are paid for with federal, state, and local funds.


While private health insurance plans accounted for the largest share of retail drug
spending in 2010, the share paid for by public programs has grown in recent years—
increasing nearly 10 percent since 2005. The increase in public programs’ share of
spending can largely be attributed to the implementation of Medicare Part D in 2006.
Going forward, a number of factors may affect the growth of prescription drug
spending and the distribution of this spending across payers. The implementation of
various provisions of the Patient Protection and Affordable Care Act, as amended
(PPACA), may affect prescription drug coverage, use, and prices. 20 Additionally,
market factors, such as the upcoming loss of patent protection for certain
blockbuster drugs, as well as the cost of new brand-name drugs entering the market,
could also affect spending.
Factors that Affect Generic Drug Use
According to a report by the Department of Health and Human Services, the
availability of generic drugs is the most important factor affecting generic drug use. 21
FDA approval is required before drugs can be marketed for sale in the United
States, though this process differs for brand-name and generic drugs. To obtain
FDA’s approval for a new, brand-name drug, 22 manufacturers must submit a new
drug application (NDA) containing data on the safety and effectiveness of the drug
as determined through clinical trials and other studies. 23 Prior to enactment of the

20
  For example, PPACA requires that uninsured individuals obtain health insurance coverage.
Specifically, beginning in January 2014, most individuals must maintain coverage for themselves and
their dependents, which includes employer-sponsored health plans, individual plans, and
government-sponsored plans. Pub. L. No. 111-148, §§ 1501(b), 10106(b), 124 Stat. 119, 244-49,
909-10 (2010), as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L.
No. 111-152, §§ 1002, 1004, 124 Stat. 1029, 1032-34 (2010) (to be codified at 26 U.S.C. § 5000A).
21
 See Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and
Human Services, Expanding the Use of Generic Drugs (Washington, D.C.: Dec. 1, 2010).
22
    A new drug is a new chemical formula or an approved drug prescribed for use in a new way.
23
 See 21 U.S.C. § 355(b). The entity that submits an application to market a drug is referred to as a
sponsor. We use manufacturer here because the sponsor of an application is usually a manufacturer.



6                                                                                 GAO-12-371R Savings from Generic Drug Use
Hatch-Waxman Act, the same types of studies were required for generic drugs as for
brand-name drugs. However, to facilitate generic entry into the market, the act
established changes to the FDA approval process for generic drugs. 24 Specifically, it
included provisions by which manufacturers of generic drugs may submit an
abbreviated new drug application (ANDA) to FDA. 25 The ANDA process does not
require manufacturers to conduct, or provide evidence from, the clinical trials that
are required of manufacturers of brand-name drugs. Rather, generic drug
manufacturers must demonstrate that a generic drug is bioequivalent to an approved
brand-name drug. As a result, the ANDA process is less time consuming and less
costly than the NDA process.
The Hatch-Waxman Act contained additional provisions to facilitate the entry of
generics onto the market. First, the act accelerated the approval process for generic
drugs by allowing generic manufacturers to collect data needed for an ANDA before
the patent on the brand-name drug expires. 26 Second, the act encouraged generic
drug manufacturers to challenge a patent associated with an approved brand-name
drug prior to its expiration by making the first generic manufacturer to do so eligible
for a 180-day market exclusivity period. 27 For 180 days after first marketing the drug,
the generic manufacturer does not have competition from other generic
manufacturers. 28 The Hatch-Waxman Act has been helpful in encouraging the
development of generic versions of brand-name drugs, as evidenced by the fact that




24
  The Hatch-Waxman Act also made changes for brand-name drugs, for example, by establishing
patent-term extensions to encourage drug manufacturers to invest in research and development.
Because manufacturers of such drugs apply for and are granted patents from the Patent and
Trademark Office before they seek approval from FDA, part of their time under patent is spent
conducting the clinical trials necessary for FDA approval and going through the FDA approval
process—which combined could take about 10-15 years of the 20-year patent term. The patent
extensions were intended to offset part of the patent term that elapsed prior to the drug being
marketed.
25
    See 21 U.S.C. § 355(j).
26
  While the Hatch-Waxman Act accelerated the generic drug approval process, FDA’s ability to
review ANDAs in a timely fashion may delay generic drugs’ entry to the market. We have previously
examined FDA’s review of ANDAs, and found that from 2004 to 2008, FDA increased the number of
ANDAs it reviewed by 42 percent; however over the same period, FDA also received a greater
number of applications each year than it was able to review, resulting in 1,441 pending ANDAs in
2008—a 123 percent increase since 2004. See GAO, Food and Drug Administration: FDA Faces
Challenges Meeting Its Growing Medical Product Responsibilities and Should Develop Complete
Estimates of Its Resource Needs, GAO-09-581 (Washington, D.C.: June 19, 2009). By the end of
2011, FDA reported that it had a backlog of about 2,500 ANDAs.
27
  One example of a patent challenge is when a generic drug manufacturer asserts that the brand-
name patent is invalid. For example, a generic manufacturer may argue that a patent is invalid
because the patent was duplicative and therefore improperly granted. When a patent is challenged,
the brand-name manufacturer has the right to bring the generic manufacturer to court where the
challenge is decided through either a court decision or a settlement; if the brand-name manufacturer
does not bring a lawsuit, the generic manufacturer may immediately begin marketing the drug after
receiving FDA approval. The Federal Trade Commission has alleged that there have been
anticompetitive patent agreements between brand-name and generic drug manufacturers. In
particular, it has raised issue with “pay-for-delay” agreements in which a brand-name manufacturer
agrees to pay a potential generic competitor to delay marketing the generic drug.
28
 Multiple generic manufacturers may qualify for the 180-day market exclusivity if several ANDA
applicants file a substantially complete application on the same day.



7                                                  GAO-12-371R Savings from Generic Drug Use
in the early 1980s, 35 percent of top-selling drugs with expired patents had generic
versions available, but by the late 1990s almost all had generics available. 29
Once generic drugs are approved by FDA, providers and consumers may substitute
them for their bioequivalent, brand-name counterparts; we refer to this process as
generic substitution. They also may substitute generic drugs for brand-name drugs
that are not bioequivalent, but are within the same therapeutic class, which we refer
to as therapeutic substitution. While generic substitution is generally considered
medically appropriate, 30 there are a number of circumstances under which
therapeutic substitution may not be appropriate. For example, some drugs in a
therapeutic class either may be more effective than others for certain individuals or
may not be safe for people with complicating health conditions. Taken together,
generic and therapeutic substitution make up the generic utilization rate (that is, the
share of all drugs dispensed that are generic), which may be affected by a number
of factors, including:
•    State generic substitution laws: States are responsible for regulating the practice
     of pharmacy. Consequently, there is variation among state requirements with
     respect to dispensing generics. For example, some states require pharmacists to
     practice generic substitution, unless the prescribing physician indicates that only
     the brand-name drug may be dispensed. Other states allow, but do not require,
     pharmacists to substitute generic drugs if the prescriber does not specify brand-
     name only. Additionally, some states require pharmacists to notify or get consent
     from consumers prior to substituting generic drugs, while others do not. 31 In the
     case of therapeutic substitution, a pharmacist cannot substitute between drugs;
     rather a physician must make the decision to prescribe a generic.

•    Pharmacy benefit management: Federal programs and private health insurance
     plans have implemented strategies to help encourage the use of generic drugs
     by their beneficiaries or members. Their strategies include tiered copayments,
     where generic drugs have a lower copayment than brand-name drugs; step-
     therapy, where consumers are required to try the most cost-effective drug in a
     therapeutic class first, usually a generic; generic-only coverage; offering free
     samples of generic medications; financial incentives for physicians and
     pharmacists to choose generics; and educational efforts to describe the benefits
     of using generic drugs, which may be targeted at both physicians and
     consumers.

•    Perceptions of generic drugs’ safety and efficacy: Physicians, pharmacists, and
     consumers may have perceptions about the safety and efficacy of generic drugs
     compared to brand-name drugs, which in turn affect what drugs they choose to
     use. These perceptions are based on a number of factors, including prior

29
 CBO, How Increased Competition from Generic Drugs has Affected Prices and Returns in the
Pharmaceutical Industry (Washington, D.C.: July 1998).
30
  While rare, there are circumstances in which consumers may medically require the brand-name
version of a drug, such as if they are allergic to an inactive ingredient found in the generic version.
31
 See Office of the Assistant Secretary for Planning and Evaluation, 2010 (citing
Epilepsy.com/Professionals. State Law or Statutes Governing Generic Substitution by Pharmacists,
Apr. 25, 2007, at http://professionals.epilepsy.com/page/statutes_by_pharmacists.html.)



8                                                     GAO-12-371R Savings from Generic Drug Use
      experience, results of relevant studies, or advertising. Negative perceptions of
      generic drugs may be more common where questions have been raised about
      the medical appropriateness of generic or therapeutic substitution. For example,
      there is controversy within the health care community about whether generic
      substitution is appropriate for drugs for which there are relatively small
      differences between the therapeutic dose and doses that could lead to serious
      treatment failure or serious adverse drug reactions. These drugs are referred to
      as having a narrow therapeutic index (NTI) and are commonly understood to
      include anti-epileptic drugs, thyroid drugs, and immunosuppressant drugs. 32

While the overall generic utilization rate was 78 percent in 2010 for drugs dispensed
in retail settings and long-term care facilities, the rate at which generic drugs were
substituted for brand-name drugs when a generic equivalent was available was
93 percent. 33 Thus, additional savings from generic drugs are likely to come mostly
from an increase in therapeutic substitution, in which a generic is substituted for a
brand-name drug that is not bioequivalent. Savings could also come from an
increase in the percentage of the prescription drug market that is available for
generic substitution, that is from more brand-name drugs gaining generic
counterparts. In 2010, 26 percent of drugs dispensed in retail settings and long-term
care facilities consisted of brand-name drugs that did not have generic
counterparts. 34
Research Used Varying Approaches to Estimate the Savings Associated with
Generic Drug Use
Our review found that research used varying approaches to estimate the savings
associated with generic drug use in the United States. One group of studies
estimated the savings in reduced drug costs that have accrued from the use of
generics, while a second group of studies estimated the potential to save more on
drugs through greater generic use. Additionally, we identified a third group of studies
that estimated the effect of using generic versions of certain types of drugs on health
care costs.
Cost Savings Accrued from the Use of Generic Drugs
We identified a group of studies that estimated the savings in reduced drug costs
that have accrued from the use of generics. The estimates of cost savings varied, in
part because the studies ranged in scope. For example, some looked only at generic
substitution, while others focused on both generic and therapeutic substitution.
Additionally, the period of observation varied among the studies as did the
population of interest. While we identified a series of studies that examined savings
to the U.S. health care system as a whole, most other studies focused on savings
accrued from the implementation of a program to encourage generic drug use or for

32
  FDA does not currently designate specific drugs as NTI drugs and, in approving ANDAs, FDA uses
the same bioequivalence standards for drugs with a wide therapeutic index and NTI drugs. FDA has
historically stated that different standards were not needed; however, the agency has recently
decided to revisit this issue. See, FDA, Summary Minutes of the Advisory Committee for
Pharmaceutical Science and Clinical Pharmacology (Silver Spring, Md.: July 26, 2011).
33
    IMS Institute for Healthcare Informatics, 2011.
34
    IMS Institute for Healthcare Informatics, 2011.



9                                                     GAO-12-371R Savings from Generic Drug Use
a specific population. The studies also calculated savings in different ways. Methods
included estimating the difference between the total amount paid for generic drugs
over a specified time period with the amount that would have been paid if brand-
name drugs had been used instead and comparing differences in drug costs with
and without the implementation of a program to encourage generic use. Examples of
studies that looked at cost savings accrued include the following:
•     A series of studies conducted for GPhA by IMS Health estimated the total
      savings generic substitution provided to the overall U.S. health care system for
      the 12-year period 1999 through 2010. 35 The reports found that during this
      period, generic substitution has saved the U.S. health care system more than
      $1 trillion. In 2010 alone, generic substitution generated more than $157 billion in
      savings. 36 These reports are the most current and comprehensive analyses of
      cost savings accrued from generic drugs. 37 The analyses estimated differences in
      the total amount paid for generic and brand-name drugs for the U.S. retail and
      institutional prescription drug market. In calculating savings, the price of brand-
      name drugs before generic entry into the market was used. An IMS official we
      interviewed explained that IMS used this approach because generic entry can
      affect brand prices. 38

•     A 2010 CBO study examined savings as a result of generic substitution in the
      Medicare Part D Program. 39 Using Part D claims data, the study found that
      dispensing generic drugs rather than their brand-name counterparts reduced
      total Part D prescription drug costs in 2007 by about $33 billion. 40 The study
      noted the difficulty associated with establishing the exact share of savings that
      accrued to the Part D program versus its enrollees. Thus, CBO estimated the
      proportion of savings accrued to each as being the same proportion as their total

35
 GPhA, Savings: An Economic Analysis of Generic Drug Usage in the U.S. (September 2011);
GPhA, Savings Achieved through the Use of Generic Pharmaceuticals, 2000-2009 (July 2010);
GPhA, Economic Analysis: Generic Pharmaceuticals 1999-2008—$734 Billion in Health Care
Savings (May 2009).
36
    GPhA, 2011.
37
 A previous analysis of cost savings accrued from generic drugs to the overall U.S. health care
system was conducted by CBO, but was based on data from 1994 when fewer generic drugs were
used. The CBO report, entitled “How Increased Competition from Generic Drugs Has Affected Prices
and Returns in the Pharmaceutical Industry,” used data from approximately 70 percent of prescription
sales through U.S. retail pharmacies and estimated that generic substitution saved approximately
$8 billion to $10 billion.
38
  The IMS official explained that they used the brand-name price prior to generic entry, as sometimes
brand manufacturers increase their prices when generics enter the market. One explanation for this
practice is that if some, less price-sensitive consumers perceive the quality of brand-name drugs to
be better than their generic competitors, they will purchase the brand-name drugs even at higher
prices. Thus, the official stated that using brand prices before generic entry provides a more reliable
way of estimating the savings associated with generics, because the analysis is not affected by these
price changes.
39
    CBO, 2010.
40
  Health care claims generally refer to charges submitted by physicians, hospitals, pharmacies, or
other providers for the sale of drugs, among other services, to private health insurance plans or public
programs. In the case of Medicare Part D, private health insurance plans typically contract with the
Centers for Medicare and Medicaid Services to provide coverage for beneficiaries and submit claims
to the Part D program.



10                                                  GAO-12-371R Savings from Generic Drug Use
     payments to Part D plans and pharmacies in that year. As a result, CBO
     estimated that approximately 72 percent ($24 billion) of savings accrued to the
     Part D program and 28 percent ($9 billion) to enrollees. In contrast to the GPhA
     reports, CBO calculated cost savings assuming that generic entry is not likely to
     have a substantial effect on the price of the brand-name drug and used the
     prices of brand drugs in 2007 in conducting its analysis. CBO officials we
     interviewed explained that they made this assumption because there is
     conflicting evidence as to the effect of generic entry on brand-name drug prices.

•    A third article looked at cost savings accrued from the implementation of a
     program to promote increased use of generic drugs in a large managed care
     organization. 41 Using claims data, the study compared those physicians who
     participated in the program in 2005 and 2006 to those who did not and found that
     the program produced drug cost savings through an increase in both generic and
     therapeutic substitution. After program expenses, the program saved the
     organization $397,486 in 2005 and $453,545 in 2006. 42

•    A fourth study looked at cost savings accrued from the implementation of a policy
     to promote the use of a generic antidepressant over its brand-name counterpart
     in a Department of Veterans Affairs (VA) hospital. 43 Using VA data and
     estimating differences in the total amount paid for the generic and brand-name
     versions of the drug, the study found that from March 2002-August 2004, the
     policy resulted in a total of $2.5 million in savings.

Potential Cost Savings from Greater Generic Drug Use
We identified a second group of studies that estimated the potential to save more on
drugs through greater use of generics. Similar to research on cost savings accrued,
while the research found that additional savings opportunities exist, the extent of the
savings varied by study scope. Most of the studies identified focused on the potential
cost savings from increasing generic substitution within a given population.
However, studies also estimated the potential cost savings from greater therapeutic
substitution or policies to encourage generic drug use, as well as the costs
associated with delayed entry of generic drugs into the marketplace. Articles in this
group also differed in population of interest and the number of drugs studied. Studies
generally calculated potential savings by estimating the difference between the total
amount paid for brand-name drugs over a specified time period with the amount that
would have been paid if generic drugs had been used instead. Additionally, while
most studies assumed a 100 percent substitution rate in conducting these
calculations, others assumed varying levels of substitution. Studies that used a
100 percent substitution rate may have overestimated savings potential, as reaching

41
  A managed care organization is a health care organization that emphasizes standardized treatment
protocols, case management, and controlled access to care.
42
  A.B. Scott, E.J. Culley, and J. O’Donnel, “Effects of a Physician Office Generic Drug Sampling
System on Generic Dispensing Ratios and Drug Costs in a Large Managed Care Organization,”
Journal of Managed Care Pharmacy, vol. 13, no. 5 (2007), 412-419.
43
 S.K. Dobscha, L.M. Winterbottom, and L.S. Snodgrass, “Reducing Drug Costs at a Veterans Affairs
Hospital by Increasing Market-share of Generic Fluoxetine,” Community Mental Health Journal,
vol. 43, no. 1 (February 2007), 75-84.



11                                                 GAO-12-371R Savings from Generic Drug Use
this level of substitution is likely unrealistic and, particularly in the case of therapeutic
substitution, not always medically appropriate. Examples of studies that looked at
potential cost savings include the following:
•    One study estimated that potential national savings from increasing generic
     substitution from about 61 percent to 100 percent would have been
     approximately $9 billion for adults in 2000. 44 The estimate was based on patient-
     reported estimates of drug prices using a nationally representative sample from
     the Medical Expenditures Panel Survey Household Component and included all
     payer types. 45

•    Another study estimated that Medicaid’s potential cost savings from increasing
     generic substitution from 81 percent to 100 percent for 20 popular brand drugs
     was $329 million in 2009. 46 The study was based on Medicaid drug utilization
     data and incorporated the price impact of drug manufacturer rebates to state
     Medicaid programs into its calculations. 47

•    The 2010 CBO study, in addition to estimating cost savings accrued in the
     Medicare Part D program, assessed the potential for additional savings from
     generic and therapeutic substitution, and found that if substitution rates had been
     100 percent, about $900 million would have been saved from generic substitution
     and $4 billion from therapeutic substitution in 2007. 48 Potential cost savings
     calculations from therapeutic substitution were for seven therapeutic classes and
     incorporated rebate data. 49


44
  J.S. Haas, K.A. Phillips, E.P. Gerstenberger, and A.C. Seger, “Potential Savings from Substituting
Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997-2000,” Annals of
Internal Medicine, vol. 142, no. 11 (June 2005), 891-897.
45
   The Medical Expenditure Panel Survey Household Component collects data, including prescriptions
filled, from individual households and their members and is supplemented by data from their medical
providers.
46
 A. Brill, “Overspending on Multi-Source Drugs in Medicaid,” American Enterprise Institute for Public
Policy Research (March 2011).
47
  In general, in order to have their drugs covered by Medicaid, manufacturers are required to pay
states rebates, calculated based on a statutorily defined formula, on outpatient drugs that are
dispensed to the states’ Medicaid patients. As of January 1, 2010, PPACA increased the rebate
percentage for this formula from 15.1 percent to 23.1 percent of the average manufacturer price
(AMP) for most brand-name drugs and from 11 percent to 13 percent of the AMP for generic drugs.
Pub. L. No. 111-148, § 2501, 124 Stat. 119, 306-10 (2010) (codified at 42 U.S.C. § 1396r-8).
However, as this study was based on 2009 data, the rebate percentages in place prior to PPACA
applied. While this study incorporated the price impact of drug manufacturer rebates on state
Medicaid programs in its calculations, some studies that looked at savings to the Medicaid program
did not.
48
  CBO, 2010. Actual generic and therapeutic substitution rates for 2007 were not included in the
report.
49
  The seven therapeutic classes that CBO examined accounted for only 17 percent of total
prescription drug costs in 2007. Thus, potential savings from therapeutic substitution could have been
higher to the extent that other classes also present opportunities for therapeutic substitution.
However, the authors also noted that savings could have been lower, because in many cases it would
not have been medically appropriate to switch a prescription. The authors took rebate data into
account only in calculating savings from therapeutic substitution, stating that outside of the Medicaid
program, rebates are generally only given for brand-name drugs that do have generic counterparts.



12                                                 GAO-12-371R Savings from Generic Drug Use
•     An industry report conducted by Express Scripts, a pharmacy benefit manager,
      also estimated the potential savings from increasing generic and therapeutic
      substitution among its members and found it to be over $20 billion in 2005;
      however the study did not separate the savings associated with each type of
      substitution. 50 The potential savings estimate was for six therapeutic classes and
      used company claims data from 48 states. 51 The savings opportunity for each of
      the 48 states was estimated by therapeutic class as the difference in actual total
      costs given each state’s 2005 generic utilization rate and what costs would have
      been if the state were able to reach the generic utilization targets for that class. 52

•     Another study examined the effect of states’ generic substitution laws on
      Medicaid spending. 53 The study estimated that for one cholesterol-lowering drug,
      the program could have saved approximately $20 million in the 15 months
      following patent expiration if all states that had a generic substitution policy
      requiring patient consent eliminated the policy. To calculate potential savings, the
      study used 2006-2007 Medicaid drug utilization data and compared actual
      generic savings between states that did not require patient consent and those
      that did.

•     A sixth study examined the cost to Medicaid of delayed generic drug entry to
      market of three case study drugs. 54 This study used Medicaid drug utilization
      data and calculated that if generic drugs had been available and fully substituted
      at their lowest cost upon the expiration of patent protection, Medicaid could have
      saved more than $1.5 billion from 2000 to 2004 for these three drugs. 55




50
  E. Cox, A. Behnm, and D. Mager, “2005 Generic Drug Usage Report,” Express Scripts (2005).
Pharmacy benefit managers administer the prescription drug benefits of health insurance plans on
behalf of plan sponsors. Their services can include negotiating with manufacturers to lower the price
that plans pay for prescription drugs and developing and managing preferred drug lists. Express
Scripts is one of the largest pharmacy benefit managers in the United States with at least 3 million
members at the time this study was conducted.
51
    The six therapeutic classes represented 40 percent of all drug spending for the study population.
52
  The generic utilization targets were estimated by Express Scripts’ clinical pharmacists by evaluating
the clinical efficacy and market dynamics of branded and generic medications across the six
therapeutic classes selected for the study. Among the six therapeutic classes, generic utilization
targets in 2005 ranged from 70 percent for anti-hyperlipidemics to 95 percent for gastrointestinals,
calcium channel blockers, and non-steroidal anti-inflammatory drugs.
53
 W.H. Shrank, N.K. Choudhry, J. Agnew-Blais, A.D. Federman, J.N. Liberman, J. Liu, A.S.
Kesselheim, M.A. Brookhart, and M.A. Fischer, “State Generic Substitution Laws Can Lower Drug
Outlays Under Medicaid,” Health Affairs, vol. 29, no.7 (July 2010), 1383-1390.
54
  A.S. Kesselheim, M.A. Fischer, and J. Avorn, “Extensions of Intellectual Property Rights and
Delayed Adoption of Generic Drugs: Effects on Medicaid Spending,” Health Affairs, vol. 25, no.6
(November/December 2006), 1637-1647.
55
  The study noted that generic drugs can be delayed from reaching the U.S. market if, for example,
manufacturers obtain patents on changes to the existing brand-name drug, including modified forms
of the same drug, new delivery systems for the drug, and new uses of the drug.



13                                                   GAO-12-371R Savings from Generic Drug Use
Effect of Using Generic Versions of Certain Types of Drugs on Health Care Costs
We identified a third group of studies that estimated the effect on health care costs
of using generic versions of certain types of drugs where questions had generally
been raised about whether substituting generic drugs for brand-name drugs was
medically appropriate; the research found mixed results about whether generic
drugs lowered health care costs in these circumstances. Unlike the research
discussed above, which focused on savings on drugs only, this research compared
savings from the lower cost of generics to other health care costs that might accrue
from their use, such as increased hospitalizations, emergency department visits, or
physician visits. These studies were generally limited to particular types of drugs
where the medical appropriateness of generic or therapeutic substitution has been
debated. Studies that looked at generic substitution focused on NTI drugs, whereas
studies that looked at therapeutic substitution did not focus on NTI drugs. For
example, studies that looked at therapeutic substitution examined selective
serotonin reuptake inhibitors (SSRIs), which are currently among the most widely
prescribed antidepressants in the United States. 56 Most studies used a regression
analysis for the estimate to account for the potential impact of confounding variables,
such as comorbidities on health care costs. 57 In addition to drugs studied, the articles
varied by a number of factors, including period of observation, health care costs
measured, selection of confounding variables, and whether patients initiated therapy
with a generic drug or switched from a brand drug to a generic drug midtreatment.
Examples of studies that looked at the effect of using generic versions of certain
types of drugs on health care costs include the following:
•    One study examined claims data between 1996 and 2004 for renal transplant
     patients in eight private health insurance plans to examine the effect of generic
     substitution of an NTI immunosuppressant drug on health care costs. 58 The study
     found that total health care costs 12 months after transplantation were higher for
     those initiating therapy with the generic immunosuppressant drug at $36,482
     versus the brand version of the drug at $32,171. This study did not find a
     difference in hospitalization or physician costs. Rather, the study found that the
     main reason for the difference in health care costs was 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.




56
  SSRIs are not NTI drugs. However, concerns have been raised about therapeutic substitution of
these drugs due to some studies suggesting that there are therapeutic differences between SSRIs.
57
  In general, regression analyses measure the relationship between independent variables, which in
this case includes drug type, and the dependent variable, which in this case is health care costs. In
measuring the relationship between an independent variable and a dependent variable, regression
analyses account for other variables that could affect the relationship between the two, also known as
confounding variables. Comorbidities are the presence of one or more diseases or conditions in
addition to a primary disease or condition.
58
 J.H. Helderman, N. Kang, A.P. Legorreta, and J.Y. Chen, “Healthcare Costs in Renal Transplant
Recipients Using Branded versus Generic Ciclosporin,” Applied Health Economics and Health Policy,
vol. 8, no. 1 (2010), 61-68.



14                                                 GAO-12-371R Savings from Generic Drug Use
•    A second study used claims data from 1998 for approximately 2,300 privately
     insured patients to determine the effect of generic substitution of an NTI
     anticoagulant drug when a switch occurred midtreatment. 59 The study compared
     treatment costs associated with using the brand and generic version of the drug
     and found that, based on data from 90 days before and the 90 days after the
     switch, the difference in total costs associated with the brand and generic
     anticoagulant drug was $3,128 less per 100 patient years for the generic.

•    Another study used claims data from about 45 private health insurance plans
     from 2003 to 2007 to compare health care costs over 6 months in patients using
     brand and generic SSRIs when therapeutic substitution occurred midtreatment. 60
     The study found that, on average, compared with patients who remained on
     brand-name drugs, patients who switched to generic drugs experienced an
     increase of $881 in total health care costs. Among other factors leading to the
     increased costs, patients who switched from brand-name drugs to generic drugs
     had higher rates of hospitalizations and emergency department visits than did
     patients who remained on the brand-name drug.

•    A fourth study reached a different conclusion about the effect of using generic
     SSRIs, when patients began treatment with a generic drug. 61 This study used
     claims data from 2005 to 2007 and compared health care costs for a 6-month
     period in patients in about 100 private health insurance plans. The study
     concluded that the total health care costs of patients using generic
     antidepressants were significantly lower than costs of patients using brand
     antidepressants, with an average of $3,660 and $4,587 respectively.

As agreed with your office, unless you publicly announce the contents of this report
earlier, we plan no further distribution until 30 days from the report date. At that time,
we will send copies to other interested parties. In addition, the report will be available
at no charge on the GAO website at http://www.gao.gov. If you or your staff have




59
 D.M. Witt, D.J. Tillman, C.M. Evans, T.V. Plotkin, and M.A. Sadler, “Evaluation of the Clinical and
Economic Impact of a Brand Name-to-Generic Warfarin Sodium Conversion Program,”
Pharmacotherapy, vol. 23, no. 3 (2003), 360-368.
60
  E.Q. Wu, A.P. Yu, V. Lauzon, K. Ramakrishnan, M. Marynchenko, R. Ben-Hamadi, S. Blum, and
M.H. Erder, “Economic Impact of Therapeutic Substitution of a Brand Selective Serotonin Reuptake
Inhibitor with an Alternative Generic Selective Serotonin Reuptake Inhibitor in Patients with Major
Depressive Disorder,” The Annals of Pharmacotherapy, vol. 45 (April 2011), 441-451.
61
 A. Vlahiotis, S.T. Devine, J. Eichholz, and A. Kautzner, “Discontinuation Rates and Health Care
Costs in Adult Patients Starting Generic Versus Brand SSRI or SNRI Antidepressants in Commercial
Health Plans,” Journal of Managed Care Pharmacy, vol. 17, no. 2 (March 2011), 123-132.



15                                                  GAO-12-371R Savings from Generic Drug Use
any questions about this report, please contact me at (202) 512-7114 or
dickenj@gao.gov. Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this report. Major contributors to this
report were Robert Copeland, Assistant Director; Kathryn Black; Laurie Pachter; and
Rachel Svoboda.
Sincerely yours,




John E. Dicken
Director, Health Care
Enclosure




16                                          GAO-12-371R Savings from Generic Drug Use
Enclosure

                        Articles Identified through Literature Review
Through a structured literature review GAO identified 30 articles that included
empirical analyses estimating the savings associated with generic drug use. To
conduct this review, GAO searched reference databases using a combination of
search terms, 1 and supplemented this information by searching government
websites, such as the Department of Health and Human Services’ website, and
websites of national organizations, including those of trade groups, such as the
Generic Pharmaceutical Association, and nonprofits, such as the Kaiser Family
Foundation. Articles identified estimated the savings in reduced drug costs that have
accrued from the use of generics, the potential to save more on drugs with greater
generic use, and the effect of using generic versions of certain types of drugs on
health care costs. Table 2 lists the 30 articles by study type.

Table 2: Articles Identified through Literature Review by Study Type

Study type             Study reviewed
Cost savings           Congressional Budget Office, Effects of Using Generic Drugs on Medicare’s
                                                                                                  a,b
accrued                Prescription Drug Spending: A CBO Study (Washington, D.C.: September 2010).
                       Dobscha, S.K., L.M. Winterbottom, and L.S. Snodgrass, “Reducing Drug Costs at a
                       Veterans Affairs Hospital by Increasing Market-share of Generic Fluoxetine,”
                                                                                              a
                       Community Mental Health Journal, vol. 43, no.1 (February 2007), 75-84.
                       Generic Pharmaceutical Association, Savings: An Economic Analysis of Generic Drug
                                                          a
                       Usage in the U.S. (September 2011).
                       Generic Pharmaceutical Association, Savings Achieved through the Use of Generic
                                                              a
                       Pharmaceuticals, 2000-2009 (July 2010).
                       Generic Pharmaceutical Association, Economic Analysis: Generic Pharmaceuticals
                                                                                a
                       1999-2008—$734 Billion in Health Care Savings (May 2009).
                       Hong, S.H., and N.F. Canterbury, “Evaluation of the Cost-Saving Potential of a Generic
                       Dispensing Incentive Program,” Drug Benefit Trends, vol. 16 (2004), 515-524.
                       Joyce, G.F., J.J. Escarce, M.D. Solomon, and D.P. Goldman, “Employer Drug Benefit
                       Plans and Spending on Prescription Drugs,” Journal of the American Medical
                       Association, vol. 288, no.14 (October 2002), 1733-1739.
                       Liberman, J.N., and M.C. Roebuck, “Prescription Drug Costs and the Generic
                       Dispensing Ratio,” Journal of Managed Care Pharmacy, vol. 16, no. 7 (September
                       2010), 502-506.
                       Scott, A.B., E.J. Culley, and J. O’Donnell, “Effects of a Physician Office Generic Drug
                       Sampling System on Generic Dispensing Ratios and Drug Costs in a Large Managed
                       Care Organization,” Journal of Managed Care Pharmacy, vol. 13, no. 5 (June 2007),
                                a
                       412-419.
                       Sy, F.Z., H.M. Choe, D.M. Kennedy, C.J. Standiford, D.M. Parsons, K.D. Bruhnsen,
                       J.G. Stevenson, and S.J. Bernstein, “Moving from A to Z: Successful Implementation of
                       a Statin Switch Program by a Large Physician Group,” American Journal of Managed
                       Care, vol. 15, no. 4 (April 2009), 233-240.


1
 We searched the reference databases for article titles, descriptors, and identifiers involving all of the
following combinations: “generic drug,” “generic pharmaceutical,” “generic prescription,” “generic
medication,” “generic counterpart,” “generic formulation,” “generic version,” “ multisource drug,”
“multisource pharmaceutical,” “multisource prescription,” “multisource medication;” and “save,”
“savings,” “spend,” “cost,” “expenditure,” “expense,” “outlay,” “economic,” “fiscal,” “financial,”
“monetary.” We then searched article abstracts using these terms as well as the following modifying
terms: “reduce,” “decrease,” “lessen,” “lower,” “minimize,” “curtail,” “moderate,” “increase,” “raise,”
“rise,” “maximize,” “add,” “elevate,” “heighten,” “steady,” “level,” “plateau,” “decline,” “surge,” “swell,”
“impact,” “effect,” “affect.”



17                                                     GAO-12-371R Savings from Generic Drug Use
Enclosure

Study type         Study reviewed
Potential cost     Bian, B., C.M.L. Kelton, J.J. Guo, and P.R. Wigle, “ACE Inhibitor and ARB Utilization
savings            and Expenditures in the Medicaid Fee-For-Service Program From 1991 to 2008,”
                   Journal of Managed Care Pharmacy, vol. 16, no. 9 (November/December 2010),
                   671-679.
                   Brill, A., “Overspending on Multi-Source Drugs in Medicaid,” American Enterprise
                                                                     a
                   Institute for Public Policy Research (March 2011).
                   Congressional Budget Office, Effects of Using Generic Drugs on Medicare’s
                                                                                              a,b
                   Prescription Drug Spending: A CBO Study (Washington, D.C.: September 2010).
                   Cox, E., A. Behm, and D. Mager, 2005 Generic Drug Usage Report, a special report
                                                                     a
                   prepared at the request of Express Scripts (2005).
                   Federal Trade Commission, Pay-for-Delay: How Drug Company Pay-Offs Cost
                   Consumers Billions. An FTC Staff Study (Washington, D.C.: 2010).
                   Fischer, M.A., and J. Avorn, “Economic Consequences of Underuse of Generic Drugs:
                   Evidence from Medicaid and Implications for Prescription Drug Benefit Plans,” Health
                   Services Research, vol. 38, no. 4 (August 2003), 1051-1064.
                   Fischer, M.A., and J. Avorn, “Potential Savings from Increased Use of Generic Drugs in
                   the Elderly: What the Experience of Medicaid and Other Insurance Programs Means for
                   a Medicare Drug Benefit,” Pharmacoepidemiology and Drug Safety, vol. 13 (2004),
                   207-214.
                   Haas, J.S., K.A. Phillips, E.P. Gerstenberger, and A.C. Seger, “Potential Savings from
                   Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey,
                                                                                                   a
                   1997-2000,” Annals of Internal Medicine, vol. 142, no. 11 (June 2005), 891-897.
                   Kesselheim, A.S., M.A. Fischer, and J. Avorn, “Extensions of Intellectual Property
                   Rights and Delayed Adoption of Generic Drugs: Effects On Medicaid Spending,” Health
                                                                                 a
                   Affairs, vol. 25, no.6 (November/December 2006), 1637-1647.
                   Pharmaceutical Care Management Association, Undermining Generic Drug
                   Substitution: The Cost of Generic Carve-Out Legislation (October 2008).
                   Shrank, W.H., N.K. Choudhry, J. Agnew-Blais, A.D. Federman, J.N. Liberman, J. Liu, A.
                   S. Kesselheim, M.A. Brookhart, and M.A. Fischer, “State Generic Substitution Laws
                   Can Lower Drug Outlays Under Medicaid,” Health Affairs, vol. 29, no. 7 (July 2010),
                             a
                   1383-1390.
                   Shrank, W.H., N.K. Choudhry, J.N. Liberman, and T.A. Brennan, “The Use of Generic
                   Drugs in Prevention of Chronic Disease is Far More Cost-Effective Than Thought, and
                   May Save Money,” Health Affairs, vol. 30, no. 7 (July 2011), 1351-1357.
                   Shrank, W.H., J.N. Liberman, M.A. Fischer, J. Avorn, E. Kilabuk, A. Chang, A.S.
                   Kesselheim, T.A. Brennan, and N.K. Choudhry, “The Consequences of Requesting
                   ‘Dispense as Written’,” American Journal of Medicine, vol. 124, no. 4 (April 2011),
                   309-317.
                   U.S. Department of Health and Human Services, Report on Prescription Drug
                   Importation (Washington, D.C.: December 2004).
Effect on health   Billups, S.J., S.L. Plushner, K.L. Olson, T.J. Koehler, and J. Kerzee, “Clinical and
care costs         Economic Outcomes of Conversion of Simvastatin to Lovastatin in a Group-Model
                   Health Maintenance Organization,” Journal of Managed Care Pharmacy, vol.11, no. 8
                   (October 2005), 681-686.
                   Helderman, J.H., N. Kang, A.P. Legorreta, and J.Y. Chen, “Healthcare Costs in Renal
                   Transplant Recipients Using Branded versus Generic Ciclosporin,” Applied Health
                                                                            a
                   Economics and Health Policy, vol. 8, no. 1 (2010), 61-68.
                   Katz, M., J. Scherger, S. Conard, L. Montejano, and S. Chang, “Healthcare Costs
                   Associated with Switching from Brand to Generic Levothyroxine,” American Health and
                   Drug Benefits, vol. 3, no. 2 (March/April 2010), 127-134.
                   LeLorier, J., M.S. Duh, P.E. Paradis, D. Latremouille-Viau, P. Lefebvre, R. Manjunath,
                   and O. Sheehy, “Economic Impact of Generic Substitution of Lamotrigine: Projected
                   Costs in the U.S. Using Findings in a Canadian Setting,” Current Medical Research and
                   Opinion, vol. 24, no. 4 (2008),1069-1081.




18                                                 GAO-12-371R Savings from Generic Drug Use
Enclosure

    Study type              Study reviewed
                            Vlahiotis, A., S.T. Devine, J. Eichholz, and A. Kautzner, “Discontinuation Rates and
                            Health Care Costs in Adult Patients Starting Generic versus Brand SSRI or SNRI
                            Antidepressants in Commercial Health Plans,” Journal of Managed Care Pharmacy,
                                                                   a
                            vol. 17, no. 2 (March 2011), 123-132.
                            Witt, D.M., D.J. Tillman, C.M. Evans, T.V. Plotkin, and M.A. Sadler, “Evaluation of the
                            Clinical and Economic Impact of a Brand Name-to-Generic Warfarin Sodium
                                                                                                     a
                            Conversion Program,” Pharmacotherapy, vol. 23, no. 3 (2003), 360-368.
                            Wu, E.Q., A.P. Yu, V. Lauzon, K. Ramakrishnan, M. Marynchenko, R. Ben-Hamadi, S.
                            Blum, and M.H. Erder, “Economic Impact of Therapeutic Substitution of a Brand
                            Selective Serotonin Reuptake Inhibitor with an Alternative Generic Selective Serotonin
                            Reuptake Inhibitor in Patients with Major Depressive Disorder,” Annals of
                                                                            a
                            Pharmacotherapy, vol. 45 (April 2011), 441-451.
Source: GAO.
a
Article discussed in the report.
b
Article listed under cost savings accrued as well as potential cost savings.




(290984)



19                                                               GAO-12-371R Savings from Generic Drug Use
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