$4 Generics Could Save Billions in Health Spending

Low-cost generics offered at retail pharmacies have massive savings potential—if patients participate.

Discount programs that cut the price of generic drugs to $4 for a 30-day supply could save US patients and taxpayers nearly $6 billion in health care costs, according to a new study. But there’s a catch, researchers say—in order to realize the potential savings of bargain-bin generics, patients actually have to participate.

Writing online in the Archives of Internal Medicine, public health experts from the University of Pittsburgh reported that less than 6% of patients purchased generic drugs through the $4 programs in 2007. If all eligible patients had taken advantage of the discounts, the total savings would have amounted to $5.8 billion.

The findings raise a thornier question: Why do so many patients pass on the chance to save money when filling their prescriptions? Current estimates of US drug pricing suggest the incentive is strong. On average, insured patients typically pay $10 for a 30-day supply of generics and $25 for the same supply of a brand-name medication—all out-of-pocket.

Brand loyalty, a major barrier to generic drug use, exacts a heavy toll that gets heavier each year. Figures released in March 2011 by the US Government Accountability Office showed that the cost of top brand-name drugs rose by an annual rate of 8.3%—more than twice the rate of other medical goods and services.

All this would seem to drive patients to seek out generic drugs for the lowest price possible; yet in their nationally representative sample of 30,964 adults surveyed as part of the Medical Expenditure Panel Survey, the University of Pittsburgh researchers found that just 5.9% of eligible adults used the $4 programs in 2007.

Lead author Yutin Zhang, PhD, assistant professor of health policy and management at the University of Pittsburgh, offered a simple explanation. In an interview with Reuters, she said, “I think a lot of people probably didn’t know” about the discounts, which began in 2006 when Walmart first introduced $4 generics.

It may also be that patients don’t see the forest for the trees. According to the results, just half of those who did not participate in the programs would have saved more than $22 a year on prescriptions. Although the small discounts add up to a greater cumulative or “societal” savings, Dr. Zhang said, “it’s not worth it for them to go to the trouble to have to switch their pharmacy plans.”

In their report, Dr. Zhang and colleagues wrote that policy reform could influence patients’ decisions, but that the exact changes needed to make it happen are “not obvious.” Further, policies that direct patients to specific programs would likely meet with backlash from critics, who argue that even the substantial societal savings aren’t worth the plans’ long-term negative impact on health care.

Pharmacy advocates, for example, worry that the $4 plans turn pharmacist-provided patient care into a commodity. If the price of drugs is the sole focal point, they argue, patients may be discouraged from visiting a single pharmacy consistently. Research suggests seeing the same pharmacist on a regular basis protects against adverse events, promotes adherence, and improves disease management.

Dr. Zhang insists that the intent of her research is not to draw patients away from their pharmacy of choice, however. “We are not promoting any specific pharmacy or any retail store’s discount generic medication program,” she said in a news release. “However,” she added, “if policy makers and clinicians direct patients to low-cost generic programs, patients and taxpayers could save tremendously.”

For other articles in this issue, see:

• FDA Warns of Fake "Anti-Radiation" Pills
• Honoring Pharmacy’s Patient Care Champions