Medicaid Program Savings Through the Use of Therapeutically Equivalent Generic Drugs

This final report notes that 11 State Medicaid programs have policies in place that promote the use of generic drugs beyond the current Federal requirements. Also, the use of generic drugs was being promoted by other programs that provide health benefits. Some programs require generic substitution when generic drugs are available, while others use financial incentives as part of their reimbursement policy. For just 37 high volume brand name drugs, we estimate annual cost savings to the Medicaid program could be as much as $46 million if the reimbursement for those drugs is limited to the amounts set by HCFA for equivalent generic drugs. The cost savings would become even greater in the future as the Federal patents on exclusive drug manufacturing of 60 highly used brand name drugs with more than $10 billion in sales expire between now and 1995.