Report: Generic utilization can save Medicaid millions

WASHINGTON — The American Enterprise Institute for Public Policy Research on Monday published a working paper that identified $329 million in overspending as a result of underutilization of generics.

As total spending on 20 medicines with generic equivalents totaled approximately $1.5 billion, AEI concluded Medicaid overspent by 22% ($1.5 billion versus $1.17 billion) on these pharmaceuticals.

“Community pharmacies are leading the way in consistently dispensing generic drugs,” noted Kathleen Jaeger, EVP and CEO of the National Community Pharmacists Association, commenting on the report. “In fact, we dispense them more often than other practice settings, such as mail-order pharmacies.”

“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%,” noted AEI research fellow Alex Brill.

On the state level, the greatest amount of overspending — where a brand-name drug was dispensed though a generic equivalent was available — was in California ($102 million), followed by Texas ($31 million), Georgia ($25 million) and Ohio ($21 million).

Brill added that thanks to the pending "patent cliff," when many blockbuster brand drugs face generic competition upon losing patent protection in 2011 and 2012, the likely future overspending in this program is even greater if new policies are not promptly adopted.