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Medicare could have saved billions had enrollees used more generics

Written by Diane Archer

Stat reports on new findings in the Annals of Internal Medicine revealing that Medicare and older adults would have saved billions had more people used generic drugs instead of brand-name drugs. Why aren’t more older adults taking generic drugs when they’re available?

Generic drugs must have the same active ingredients in the same strength as brand-name drugs. They also tend to cost a lot less than brand-name drugs. But, Medicare does not require people to take generics when available, and many doctors prescribe brand-name drugs, even though they cost more. Pharma does its best to incentivize doctors to prescribe brand-name drugs.

Differences in cost between generics and brand-name drugs can be substantial. For example, in the six years between 2011 and 2017, Medicare spent more than $13 billion on Nexium, which treats acid reflux. Had Medicare paid for Prilosec instead of Nexium, it would have spent $700 million during that time period, literally a $12.7 billion savings. Savings to older adults would have been $690 million.

Based on the available data, Nexium is no better at treating acid reflux, nor is it safer, than Prilosec. In fact, newer drugs present unknown safety risks that older drugs do not have. There is no data comparing the efficacy or safety of these two drugs.

Medicare Part D insurers apparently have not steered enrollees towards generic drugs when available and appropriate, as much as they might have. In some cases, it may not be in their financial interest to do so. Rather, they may get paid by pharmacy benefit managers or drug makers to promote brand-name drugs. And, Medicare does not require them to encourage, let alone require, people to use generic drugs.

In addition, the pharmaceutical industry has managed to shape state laws to maximize their profits. Pharmacies are often not permitted to substitute generics for brand-name drugs.

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