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Blog: Prescribing generic drugs could have saved $73 billion

The nation could have saved an estimated $73 billion from 2010 to 2012 if clinicians had more frequently prescribed alternatives to brand-name drugs, a JAMA Internal Medicine study finds. The total out-of pocket savings for patients would have been about $25 billion.

Researchers aimed to put a price tag on how much money could be saved overall and out-of-pocket through the use of generic drugs and “therapeutic substitutes.” The latter term describes prescription drugs for which no generic equivalent exists, but for which there is an equally effective alternative within the same drug class.

Drug costs have been a critical issue in recent years. Spending on prescription drugs increased 13% in 2014, reaching $373 billion, an issue that has drawn the attention of Congress and presidential hopefuls.

The anticipated approval of new specialty medications for chronic conditions like diabetes and asthma may further drive up spending, analysts say. The Institute for Clinical and Economic Review plans to release cost-effectiveness reports for a slate of therapies that are pending Food and Drug Administration approval this year.

In an effort to improve transparency, a coalition of organizations representing doctors, nurses, hospitals, insurers and consumers thinks drugmakers should be required to report their development costs, give annual reports on drug list prices and project federal spending before their drugs can be approved by the FDA.

The new JAMA Internal Medicine study is among the latest to focus on reducing costs by curbing the over-prescription of brand-name drugs. Many clinicians have been reluctant to engage in the practice, especially when it comes to prescribing therapeutic substitutes, over fears the drugs could result in worse clinical outcomes for patients. The study also points to another clear incentive to prescribe pricier drugs.

“Pharmaceutical companies frequently provide rebates to payers,” noted authors Dr. Michael Johansen of Ohio State University and Dr. Caroline Richardson of the University of Michigan. Those discounts are proprietary and are not accounted for in federal data. Even more, patients don't get the same financial benefit. The researchers took into account those pharmaceutical rebates in their estimates.

In the study, Johansen and Richardson looked at responses from 107,132 individuals in the Medical Expenditure Panel Survey from 2010 to 2012. Patients who took the survey self-reported their medication use, and researchers then turned to the FDA's Orange Book to see if the drugs had therapeutic equivalents. They used financial statements and FDA records on pharmaceutical companies to estimate drug costs.

The researchers found that among patients who reported using a prescription, the total expenditure was $147 billion for branded drugs and $62.7 billion for the generics. This equated to a potential excess spending of 9.6% for the nation overall, and 14.1% for patients out-of-pocket. The drug classes that resulted in the highest excess costs included statins at $10.9 billion, atypical antipsychotics at $9.9 billion, and proton pump inhibitors and SSRIs at around $6 billion each.

Though controversial, therapeutic substitution offers one potential mechanism to significantly decrease drug costs, “if it can be implemented in a way that does not negatively affect quality of care,” the authors conclude.

They aren't the only one saying more emphasis should be placed on over-use of brand-name drugs.

Last year the American College of Physicians' Clinical Guidelines Committee acknowledged that there are situations where generic substitution is not appropriate, but said physicians should prescribe generics “whenever possible.”

Similar therapies in a class of drugs may differ in their effectiveness, potency and safety profile, noted Dr. Joseph Ross, a professor of medicine and health policy at the Yale School of Medicine, in an editorial accompanying the new study in JAMA Internal Medicine. That can make prescribing drug substitutes tricky.

He also notes, however, the tendency of drug manufacturers to overstate the “special benefits” of new brand-name therapies “even when these benefits have not been substantiated.”

Others have noted that the cost of genetic drugs is also increasing. Prices rose faster than inflation for 22% of the top generic drugs reviewed between 2005 and 2014, according to a report released last year by the HHS' Office of Inspector General.

There should be systematic protocols that help both clinicians and patients understand when a substitute therapy is safe, effective and more cost-effective, Ross said.

“This work is not easy,” he said. “But the financial savings will be large.”


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