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Medicaid tallies savings.

WASHINGTON -- The use of generic drugs not only offers savings to private payers and individuals but to public programs as well.

A study by the Centers for Medicare and Medicaid Services found that generic drugs represented approximately 81% of Medicaid prescriptions but only 26% of expenditures during the study period of July 1, 2013, to June 30, 2014.

CMS also found that nearly 65% of Medicaid generic prescriptions were for generic drugs that experienced cost decreases. Generic drugs with very significant acquisition cost increases (more than 100%) accounted for approximately 2% of $23.3 billion in total Medicaid expenditures on all prescription drugs (generic and branded) and approximately 9% of $6.0 billion in total Medicaid expenditures on generic drugs over the study period.

According to the Department of Health and Human Services (HHS), expanding the definition of a significant increase in acquisition costs to include increases of more than 20% means that less than 4% of total Medicaid expenditures on all prescription drugs and less than 15% of Medicaid expenditures on generic drugs experienced a significant increase.

The government studies offered specific examples of how even significant increases in acquisition costs have resulted in relatively minimal rises in Medicaid expenditures. For example, tetracycline had an increase in acquisition cost of more than 17,000% but it represents only 0.001% of Medicaid prescription drug expenditures and 0.001% of overall Medicaid prescriptions dispensed.

"Overall, it appears that generic drugs continue to account for the majority of Medicaid prescriptions but a much smaller amount of Medicaid drug expenditures than branded drugs. Consistent with this, drug acquisition costs fell for the majority of generic Medicaid prescriptions measured by both volume and total generic expenditures," says HHS.

"Among Medicaid generic prescription drugs that experienced an increase in acquisition cost, most were drugs with an increase of less than 20%. For the generic drugs that experienced an increase in acquisition costs, nearly a quarter more than doubled their acquisition cost. The generic therapeutic drug classes that did experience substantial increases in acquisition costs had relatively low Medicaid drug expenditures and number of prescriptions filled."

Relatedly, the HHS Office of the Inspector General (OIG) undertook a separate analysis of AMP, the price paid to manufacturers and reported to CMS for sales to retail organizations. OIG analyzed changes in the actual AMP relative to an inflation-adjusted AMP from 2005 to 2014 for the top 200 Medicaid generic prescription drugs as ranked by Medicaid reimbursement each year during the time period.

OIG found that, on average, 22% of generic prescription drugs had an actual quarterly AMP that exceeded the inflation-adjusted AMP over the study period, ranging from 18% in 2006 to 35% in 2014.

For comparison, OIG previously completed an analysis of actual quarterly AMP relative to inflation-adjusted AMP from 1991 to 2004 and found that, on average, 35% of generic drugs had an actual AMP that exceeded the inflation-adjusted AMP. This indicates that since 1991, a significant percentage of generic drugs have had AMP increases greater than the inflation-adjusted AMP, according to the OIG report.

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Title Annotation:RX: Generic Drug Report
Publication:Chain Drug Review
Date:Feb 22, 2016
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