Generic drugs in USA's Medicare Part D saved beneficiaries and program $33 billion in 2007, says new CBO study

New research released by the USA’s Congressional Budget Office (CBO) found that the use of generic medications rather than brand-name medications in Medicare Part D saved beneficiaries and the program about $33 billion in 2007, while an additional $14 billion in savings is expected as first-time generics enter the market through 2012.

Four years ago, Medicare began providing outpatient prescription drug benefits for senior citizens and people with disabilities. Known as Part D, the program uses private plans to provide coverage for prescription drugs to enrollees. Those plans negotiate payment rates with pharmacies and rebates from drug manufacturers while competing for enrollees. Such competition provides incentives for plans to control their costs; one important way in which plans seek to control costs is by encouraging the use of generic drugs.

In 2007, total payments to plans and pharmacies from the Part D program and its enrollees were about $60 billion. The total number of prescriptions filled was about 1 billion, of which 65% were filled with generic drugs, 5 with multiple-source brand-name drugs (brand-name drugs that are also available in generic versions), and 30% with single-source brand-name drugs (brand-name drugs for which no chemically equivalent generic versions are available). Even though a majority of prescriptions were filled with generic drugs, their lower prices meant that those prescriptions accounted for only 25 percent of total prescription drug costs.