Medicaid is wasting hundreds of millions of dollars each year purchasing name-brand drugs in cases where a cheaper generic is also available, according to a report released Wednesday by the American Enterprise Institute (AEI), a conservative think-tank.
After examining two-thirds of the $21.8 billion Medicaid spent on pharmaceuticals last year, AEI researchers identified 20 branded drugs commonly purchased by the program for which a generic option exists. The savings if Medicaid had purchased the generics instead of the branded drugs? $271 million, AEI estimates.
Drilling down, researchers found that 12 of those 20 drugs made up 94 percent of the waste. Purchases for just two branded drugs — Lamictal (generic: lamotrigine) and Risperdal (generic: risperidone) — accounted for $95 million of the overspending, AEI found.
Furthermore, AEI reports, roughly three-quarters of the waste surrounded drugs whose generic counterparts hit the market most recently, in 2008 or 2009.
The findings raised the eyebrows of the National Coalition on Health Care (NCHC), a nonprofit health reform advocate, which said the report “provides a solid basis for starting a much-needed national dialogue about how best to address increasing drug costs not only in Medicaid but also in other parts of our health system.”
“Rising pharmaceutical costs, the aging population, and increased use of costly specialty drugs makes containing drug-related spending an urgent health system priority closely linked to expanding access to care and improving quality,” Ralph Neas, who heads NCHC, said in a statement.
“All stakeholders need to be engaged in developing policies and practices to help contain prescription drug related without negatively impacting clinical decisions or therapeutic outcomes.”