$20 billion in untapped generic drug savings

U.S. consumers could have saved $20 billion in 2004 and even more during this and future years by using more generic drugs, according to a new report by Express Scripts, Inc. Projectable to the U.S. commercially insured population, the study examined six major drug-therapy classes and was based on a random sample of approximately 3 million individuals.

The Express Scripts "2004 Generic Drug Usage Report" also ranked generic drug use and savings opportunities by state, revealing significant variation across the six drug categories used to treat common conditions like stomach ulcers, inflammation, depression, high blood pressure and high cholesterol. The company is one of the nation's largest managers of pharmacy benefit plans for employers, governments, unions and health plans.

The most dramatic savings potential exists for generic gastrointestinals, which are dispensed only 31% nationwide, but could feasibly reach as much as 95% adoption, the report finds. As such, greater use of non-branded gastrointestinals alone could drive down costs an additional $5.4 billion nationally.

In the anti-cholesterol category, generics are only dispensed 7% of the time nationally. However, drug costs could be reduced an additional $5.1 billion annually if generic fill rates reach the 70% goal projected in the report. The generic fill rate goals utilized in the study are based on an evaluation of clinical efficacy and market dynamics of branded and generic medications.

"We have only scratched the surface in taking advantage of the money-saving potential of clinically sound generic drugs," said Steve Miller, MD, Express Scripts Vice President, Research, and a study author. "As additional generics come to market and the use of prescription drugs grows, the opportunity to lower healthcare costs becomes even more significant. Best of all, using more generics simply requires better education and awareness of alternatives, not a big-dollar up-front investment."

"Consider that $20 billion in generic drug savings in just six therapy classes is the same amount America's community hospitals spend each year on uncompensated care for the uninsured," added Miller.

The savings opportunity from increased use of generic drugs has never been greater. More than $50 billion worth of branded drugs will lose patent exclusivity over the next five years. In the next year alone, $11 billion in drug sales are expected to lose patent, with generic alternatives becoming available for at least 15 branded drugs. The largest-selling drug losing exclusivity in 2006 is Zocor, the cholesterol-reducing blockbuster that posted more than $3 billion in U.S. sales in 2004.

On average, a generic drug costs approximately $60 less than a brand name drug. Consumers also pay a lower co-payment for generic medications, saving $10 or more per prescription on average compared to branded medications.

Potential generic drug savings across six drug therapy classes*

Class Actual Target Savings
Gastrointestinals 31% 95% $5.4 billion
Anti-cholesterol 7% 70% $5.1 billion
Anti-depressant 41% 75% $3.2 billion
NSAIDs 47% 85% $3.9 billion
Anti-hypertensives 48% 75% $2 billion
Calcium channel blockers 43% 90% $484 million
TOTAL POTENTIAL SAVINGS $20 billion
*Source: 2004 Generic Drug Usage Report, Express Scripts, Inc.

State-By-State Variation

The Express Scripts study found that Massachusetts, Oregon and New Mexico had the highest generic fill rates, at 56% each. The lowest generic fill rates were in New Jersey (41%) and New York (43%). Southern states, including Texas, Louisiana and Florida, opted for generics for fewer than 46% of all prescriptions filled in 2004.

The states with the greatest savings opportunity from generics are California and Texas, at $1.5 billion each, and New York, Florida, Ohio and Pennsylvania, at $1 billion each. Possible explanations for the variations in generic fill rates include divergence in prescribing patterns, state regulations, differences in disease prevalence and varying use of drug-benefit programs that encourage greater use of generics.

Miller outlined four steps consumers, health plans, health professionals and policymakers can take to increase the use of generic drugs:

# Recognize that using more generic drugs will free up resources to meet other pressing health care needs and help preserve the pharmacy benefit as we know it – without impacting quality.

# Increase awareness of generic alternatives to brand drugs.

# Adopt pharmacy benefit plan designs that encourage greater use of generic drugs, for example by using a program called step therapy where a generic drug is tried first, before a brand.

# Enact state laws and regulations that promote the use of chemically equivalent generic alternatives to brand drugs.

From Express Scripts, Inc.