Study Finds $14 Billion Savings Potential in 2003 for Medicare Beneficiaries By Increasing Use of Generic Drugs

1/30/2002

From: Clay O'Dell of GPhA, 202-833-9070, ext. 106; e-mail: clay@gphaonline.org

WASHINGTON, Jan. 30 -- As the President and Congress look for ways to fund a Medicare Prescription Drug Benefit, a new study released today highlights the increased savings offered by generic drugs. The study, from the Schneider Institute for Health Policy at Brandeis University, concludes that Medicare can save tens of billions of dollars in a proposed drug benefit program through generic pharmaceutical incentive techniques currently used in the private sector.

"Greater Use of Generics: A Prescription for Drug Cost Savings," the first systematic research quantifying the potential savings that can be realized from the greater use of generics, was released today during a press conference at the National Press Club in Washington, D.C. The study's primary author is Stan Wallack, Ph.D., of Brandeis University, who was assisted by Grant Ritter and Cindy Thomas.

Today's event was sponsored by the Generic Pharmaceutical Association (GPhA) and featured Wallack, executive director of Brandeis' Schneider Institute. Sen. Charles Schumer (D-N.Y.), who with Sen. John McCain (R-Ariz.) is cosponsor of pending legislation to increase access to generic pharmaceuticals, also spoke at the event.

Key Study Findings: -- For Medicare's 40 million beneficiaries, a total savings potential of $14 billion (16.3 percent or $350 savings per individual) in 2003 is possible by increasing the rate of generic usage to that of similar high performing private sector plans. -- Over a ten-year period, more than $250 billion in savings could be achieved. -- Adopting a benefit design and implementation strategy that encourages greater use of generic medications would significantly lower the cost of a Medicare drug benefit.

"The report concludes that substantial savings can be realized if generic drug incentive techniques used in the private sector are broadly applied within a Medicare Prescription Drug Program," said Dr. Wallack "Effective private sector initiatives currently in use that encourage appropriate generic utilization would either substantially reduce the cost of a Medicare Prescription Drug Benefit or would dramatically increase its value."

Schumer spoke about the need to get generics to the American consumer more quickly and efficiently. "At a time when every attempt to lower the cost of prescription drugs gets bogged down in partisan wrangling, this report makes crystal clear that access to generic drugs is the key.

"Unfortunately, loopholes in our drug patent laws have helped the big drug companies keep lower cost generics off the market. Senator McCain and I are committed to passing our bill, The Greater Access to Affordable Pharmaceuticals Act, which would close these loopholes and ensure that generic drugs come to market when they are supposed to," said Schumer.

Citing President Bush's call for a new prescription drug benefit within Medicare during his State of the Union Address, GPhA Board Chair Dr. Carole Ben-Maimon said, "The timing of the study could not be better. It's message could not be clearer. As Congress reconvenes for the 2002 legislative session providing high quality, low-cost health care continues to be a priority for all Americans and particularly for those in the Medicare program.

"As the study points out, the savings generated from generic utilization could go a long way towards making a Medicare drug benefit possible. Likewise, increased generic utilization could make an existing benefit more generous."

Ben-Maimon introduced the press conference speakers who, in addition to Wallack and the senator, included Dr. Andrew Garling, senior vice president of AdvancePCS, and John Rother, director of policy and strategy for AARP. Both addressed the study's importance to their respective constituencies, specifically, the ability to make prescription pharmaceuticals more cost-effective for America's seniors.

Complete copies of "Greater Use of Generics: A Prescription for Drug Cost Savings" are also available on GPhA's Web site at http://www.GenericAccess.com For further questions about the study contact, GPhA at 202-833-9070.

------ GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic drug industry. Generics represent 44 percent of the total prescriptions dispensed in the U.S.