Potential Savings from Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997–2000

7 June 2005 | Volume 142 Issue 11 | Pages 891-897

Background: Generic substitution is one mechanism of curtailing prescription drug expenditures. Limited information is available about the potential savings associated with generic substitution.

Objective: To estimate the potential savings associated with broad substitution of generic drugs.

Design: Cross-sectional, nationally representative survey of noninstitutionalized adults.

Setting: United States.

Participants: Adults included in the Medical Expenditure Panel Survey Household Component, 1997–2000.

Measurements: Use of a multisource drug (that is, a drug available in a brand-name and 1 generic formulation) or a generic drug and the potential cost savings associated with broad generic substitution for all multisource products.

Results: Fifty-six percent of all outpatient drugs were multisource products, accounting for 41% of total outpatient drug expenditures. Of these multisource drugs, 61% were dispensed as a generic. If a generic had been substituted for all corresponding brand-name outpatient drugs in 2000, the median annual savings in drug expenditures per person would have been $45.89 (interquartile range, $10.35 to 158.06) for adults younger than 65 years of age and $78.05 (interquartile range, $19.94 to $241.72) for adults at least 65 years of age. In these age groups, the national savings would have been $5.9 billion (95% CI, $5.5 billion to $6.2 billion) and $2.9 billion (CI, $2.6 billion to $3.1 billion), respectively, representing approximately 11% of drug expenditures.

Limitations: Specific information about an individual's formulary was not available, so the authors could not estimate how much of the potential savings would benefit an individual or his or her health plan.

Conclusion: Although broad substitution of generic drugs would affect only a modest percentage of drug expenditures, it could result in substantial absolute savings.

Editors' Notes Context The cost of prescription drugs is of great concern to Americans. The substitution of cheaper generic drugs for more expensive brand-name drugs might reduce prescription drug costs. Contribution Using data from the 1997–2000 Medical Expenditure Panel Survey Household Component, the researchers estimated that substitution of a generic for a brand-name drug whenever available would have saved approximately $46 per year for adults younger than 65 years of age and approximately $78 per year for older adults. Implication While the per capita savings of generic substitution appear modest, national savings would be substantial: about $6 billion for adults younger than age 65 years and about $3 billion for older adults. –The Editors

 

Author and Article Information

From Brigham and Women's Hospital, Boston, Massachusetts; and University of California, San Francisco, San Francisco, California.

Acknowledgments: The authors thank Jaylyn Olivo for editorial assistance and Dr. Michael Fischer for comments on an earlier version of the manuscript.

Potential Financial Conflicts of Interest: None disclosed.

Requests for Single Reprints: Jennifer S. Haas, MD, MSPH, Brigham and Women's Hospital, Division of General Medicine and Primary Care, 1620 Tremont Street, Boston, MA 02120; e-mail, jhaas{at}partners.org.

Author Contributions: Conception and design: J.S. Haas, K.A. Phillips.

Analysis and interpretation of the data: J.S. Haas, K.A. Phillips, E.P. Gerstenberger, A.C. Seger.

Drafting of the article: J.S. Haas.

Critical revision of the article for important intellectual content: K.A. Phillips, A.C. Seger.

Final approval of the article: J.S. Haas, K.A. Phillips, E.P. Gerstenberger, A.C. Seger.

Provision of study materials or patients: J.S. Haas.

Statistical expertise: J.S. Haas, E.P. Gerstenberger.

Obtaining of funding: J.S. Haas, K.A. Phillips.

Administrative, technical, or logistic support: J.S. Haas.

Collection and assembly of data: J.S. Haas, K.A. Phillips.

Current Author Addresses: Drs. Haas and Seger and Mr. Gerstenberger: Brigham and Women's Hospital, Division of General Medicine and Primary Care, 1620 Tremont Street, Boston, MA 02120.

Dr. Phillips: Box 0613, University of California, San Francisco, San Francisco, CA 94143.

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