Zhang Y, Zhou L, Gellad WF. Potential Savings From Greater Use of $4 Generic Drugs. Arch Intern Med. 2011;171(5):468-469. doi:10.1001/archinternmed.2011.46
Discounted generic medication programs ($4 per 30-day supply or $10 per 90-day supply) are available at pharmacies of many retail stores, such as Wal-Mart and Target.1,2 While most prescription drug coverage requires patients to pay $10 to $11 per 30-day supply for generic drugs and $25 to $27 for preferred brand-name drugs between 2006 and 2009,3 anyone regardless of insurance, pays only $4 for qualifying generic drugs through these programs. Use of $4 programs could potentially save patients and society billions of dollars. To our knowledge, our study is the first to evaluate who may be using $4 programs and potential national savings from broad use of these programs.
We examined a nationally representative sample of 30 964 individuals in the 2007 Medical Expenditure Panel Survey (MEPS).4 Our study population consisted of individuals older than 18 years who used any generic medications or their brand-name counterparts, available in $4 programs any time in 2007. We limited our analysis to pills, tablets, or capsules. To identify prescriptions for these medications filled through $4 programs in MEPS, we used the following criteria: (1) the drug was available through a $4 program at $4 for a 30-day quantity; (2) patients paid $4 out-of-pocket for the same 30-day quantity; and (3) no other payers contributed to the payment (ie, patients bore the total medication cost). We defined those who did not use $4 programs and could save if they filled their drugs (both generic or brand name) at $4 programs as “potential users” and calculated potential savings as the difference between MEPS actual prescription payments and potential costs if one were to buy the drugs from $4 programs. Because not every potential user would switch to a $4 program, we conducted sensitivity analyses. We ranked the potential out-of-pocket savings among potential users from highest to lowest and then calculated potential savings assuming only the top 80%, 50%, and 30% of potential users would switch.
Among 30 964 individuals sampled in the 2007 MEPS, 13 908 adults filled at least 1 prescription in 2007, accounting for 50% of the US population. Approximately 55% of the 13 908 adults (n = 7690) used any drug (either generic or brand name) whose generic formulation is commonly available in the $4 programs, corresponding to 80 567 861 US adults. Among these 7690 adults, only 5.9% (n = 450) used a $4 program in 2007; and 60.2% (n = 4628) could potentially have filled their prescription in a $4 program. This corresponds to 4 429 793 current users and 50 188 290 potential users among US adults.
The Table presents the potential savings from switching from brand-name drugs and regular generics to $4 generics using 2007 MEPS data. The mean total savings per person over 1 year for both generic and brand-name drugs would be $115 (95% confidence interval [CI], $107-$124) and the mean out-of-pocket savings per person would be $64 (95% CI, $59-$69). The total societal savings based on the weighted US population would be $5.78 billion, of which $3.23 billion is attributed to patient out-of-pocket savings and $1.07 billion to Medicare.
If we assumed only the top 80% of potential users would switch, the potential total societal savings would be $5.64 billion, with $3.20 billion savings to patients and $1.04 billion to Medicare. The mean total saving per person would be $141 (95% CI, $131-$151) and the mean out-of-pocket savings per person would be $80 (95% CI, $74-$86). If only the top 30% of potential users would switch, the total societal savings would be $4.21 billion (Table). Examining the distribution of savings shows that 50% of potential users would save less than $22 a year out-of-pocket, and only 5% of all potential users could save more than $269 and approximately 1% could save more than $718 annually out-of-pocket.
We found that among patients taking drugs available in $4 programs and their brand-name counterparts, only 5.9% actually paid $4 in 2007. The societal savings would be $5.8 billion in 2007 if all potential users switched to a $4 program; however, only 50% of potential users would save more than $22 a year out-of-pocket.
While the policy change to encourage these cost savings is not obvious, the ramifications of such a change are important to consider. A potential savings of $6 billion represents approximately 2.5% of total health expenditures on prescription drugs in 2007, which is not inconsequential.5 In addition, our savings calculations only assumed direct substitution and did not incorporate the possibility of therapeutic substitution, and our analysis excluded children. It remains to be seen what the uptake of these programs has been since 2007.
We are not attempting to promote WalMart or any other specific pharmacy as the place for patients to fill their prescriptions. It appears, however, that the majority of savings comes from a small proportion of individuals, and if policy makers and clinicians can direct these individuals to low-cost generic drug programs, patients, payers, and taxpayers could save enormously.
Correspondence: Dr Zhang, Department of Health Policy and Management, University of Pittsburgh, 130 De Soto St, Crabtree Hall A664, Pittsburgh, PA 15261 (email@example.com).
Author Contributions:Study concept and design: Zhang and Gellad. Analysis and interpretation of data: Zhang, Zhou, and Gellad. Drafting of the manuscript: Zhang, Zhou, and Gellad. Critical revision of the manuscript for important intellectual content: Zhang and Gellad. Statistical analysis: Zhang and Zhou. Obtained funding: Zhang and Gellad. Administrative, technical, and material support: Zhang. Study supervision: Zhang.
Financial Disclosure: None reported.
Funding/Support: This project was supported in part by the RAND–University of Pittsburgh Health Institute (RUPHI), a formal collaboration between the RAND Corporation, RAND Health, and the University of Pittsburgh School of the Health Sciences, and the Clinical Translational Science Institute: Translating Research Into Practice Program. This publication was made possible by grant UL1 RR024153 from the National Center for Research Resources (NCRR), a component of the National Institutes of Health (NIH) and NIH Roadmap for Medical Research.
Disclaimer: The contents of this publication are solely the responsibility of the authors and do not necessarily represent the NCRR.
Previous Presentation: Dr Zhang gave a podium presentation of this study at the AcademyHealth Annual Meeting; June 27, 2010; Boston, Massachusetts.
Additional Information: For more information about RUPHI, please visit our Web site at http://www.ruphi.pitt.edu. Information on Re-engineering the Clinical Research Enterprise can be obtained from http://nihroadmap.nih.gov/clinicalresearch/overview-translational.aspx.