Medicaid Overspent $271 Million on Brand-Name Drugs

Medicaid unnecessarily spent $271 million on brand-name drugs when much cheaper generic versions were readily available, according to a report from the American Enterprise Institute.

The Institute identified 20 brand-name drugs that Medicaid paid for, calling the outlay on those pharmaceuticals “wasteful spending.”

Medicaid’s utilization rate of generic drugs is only around 64 percent, about 10 percent lower than for the general population, an analysis by the Generic Pharmaceutical Association (GPhA) found.

Every 2 percent increase in the substitution of generic drugs for brand-name medications reduces Medicaid drug spending by about $1 billion, the GPhA reported.

The potential for savings on drugs is enormous. For the decade 2000 through 2009, the use of generic prescription drugs in place of brand-name products saved the nation’s healthcare system more than $824 billion.

Last year alone, the use of FDA-approved generics saved $139 billion — a 15 percent increase over the prior year — or about $382 million every day.

The increase is largely due to several widely prescribed drugs coming off patent and being replaced by generic versions, including the antidepressants Zoloft and Zocor.

For Medicaid, achieving savings on drugs is increasingly important, The Wall Street Journal observed, because “participation in the federal-state program as well as state children’s health programs will expend” by anywhere from 16 million to 23 million, according to varying estimates.