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.

BACKGROUND: Generic medications provide the same clinical effect at lower cost than brand name drugs but little is known about the extent to which such savings are achieved in drug benefit programs serving the elderly.

METHODS: Using patient-level claims data for participants aged 65 or more in one state Medicaid program and in a non-Medicaid drug insurance program for the elderly, we compared the expenditures in each program for brand name prescriptions with the amount that would have been paid for generic versions of the same agents. We then estimated potential savings from increased use of substitutable brand name drugs.

RESULTS: There was an unrealized annual savings of 3.4 million dollars (3.6% of total drug expenditure) in the Medicaid program studied and 13.7 million dollars (9.5% of total drug expenditure) in the non-Medicaid drug insurance program for the elderly, with corresponding reductions in mean annual per-patient drug costs.

CONCLUSIONS: More widespread use of generic medications represents an important source of unrealized savings in drug coverage programs for the elderly. The Medicaid program limits the excess spending on brand name drugs by imposing pricing restrictions, but many non-Medicaid programs could realize even larger savings from reducing the use of brand name drugs when identical generic products are available. These findings offer some insight into the potential expense of a Medicare prescription drug benefit.