At a time when state fiscal woes are forcing cuts in Medicaid, researchers at the Division of Pharmacoepidemiology at Brigham & Women’s Hospital in Boston and Harvard Medical School have identified a policy with at least $100 million in potential savings: make generic substitution policies work more effectively.

A new study in the July issue of Health Affairs highlights savings opportunities some state Medicaid programs could take advantage of by changing their generic substitution laws.  Currently, 39 state programs require patient consent for pharmacists to substitute a prescribed brand name drug for a generic.

Given the strong influence of pharmaceutical marketing, patients often have an unwarranted negative view of generic drugs, requesting more expensive branded options when they are not necessary.  Generics are certified by the FDA to be chemically equivalent to their brand name counterparts.  The rationale for allowing pharmacists to voluntarily substitute generics is to ensure that Medicaid is not wasting money.  Saving money protects access to care in budget-stressed programs like Medicaid.   By leaving the generic substitution decision to pharmacists, states could expect to save more than $100 million on just three top-selling medications—Plavix, Lipitor and Zyprexa— that are nearing patent expiration.

The study, led by Dr. William H. Shrank, looked at the relationship between Medicaid policies on generic substitution and the use of the cholesterol drug simvastatin vs. Zocor, its branded equivalent, after Zocor’s patent expired in June 2006.  While all states have adopted generic substitution laws, the extent to which pharmacists or patients can influence the medications they choose differs from state to state.  The Harvard researchers found that states that did not require patient consent to switch prescriptions from Zocor to the clinically equivalent, less costly simvastatin saved $15.35 per prescription on these medications in the first quarter after patent expiration.  If all states had adopted such policies, Medicaid programs could have saved $19.8 million nationwide on the introduction of simvastatin.

While patients should be empowered to participate in their own health decisions, this study demonstrates that requiring patient consent for generic substitution impedes patients from initially choosing generics even when they will eventually prefer them to the brand name.  After four financial quarters, the rates of choosing generic simvastatin over Zocor begin to converge between states that require consent and states that do not.  Patients in both states will eventually choose to take advantage of the cost savings from choosing the safe, effective, and cheaper alternative.  But for patients in states that do require consent, the cost savings come at a slower pace.  And in the case of Zocor, that meant $19.8 million in foregone savings for state Medicaid programs—savings that could have been used to protect access to care.

The study comes as welcome news for patients and policy makers at a time when state Medicaid programs are facing severe budget cuts.  Generics cost, on average, 30-80 percent less than brand name competitors.

Marcia Hams, director of prescription access and quality at Community Catalyst, stressed the great importance of these findings in light of Medicaid shortfalls in a recent BNA report.  If state programs are forced to overspend on drugs, she explained, people may  start to lose their benefits or eligibility.  The use of brand name drugs instead of generics is thus “an unnecessary cost that could endanger beneficiaries in the [Medicaid] program.”

Massachusetts Medicaid, with a very high (78 percent) generic rate and no patient consent requirement, may illustrate the point, according to Hams, although other strategies were also involved. “A study we commissioned in 2009 found that MassHealth achieved significant savings to curb increasing drug costs by using coordinated policies that increased generic drug use, while putting clinical considerations first.”

Of course, neither PostScript nor the study authors are advocating the use of generic medication for every patient or for the use of generic-only formularies.  A physician should, and can, always mandate the use of a brand name drug if necessary.  (Find out more information on the safety, value, and appropriate use of generic medications at: We agree with the study authors that a modified generic substitution policy could produce cost savings without compromising quality while leaving room to invest health care dollars more effectively and preserve vital programs.

–Joy Lee, policy intern