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Transforming Health: Pricing generic drugs

Written by Megan Lello | Apr 18, 2013 4:52 AM

(Undated) -- Health care costs have been increasing in recent years, especially when it comes to prescription drugs. One way some economists, doctors, and pharmacists are advocating to keep costs down to both the consumer and the health care industry on the whole is to use generic, rather than name brand, drugs.

Thumbnail image for prescription pills drugs bottle

Forty-eight percent of Americans took at least one prescription drug in the past month. That's not news to Chuck Kray, co-owner of HersheyCare, which oversees several pharmacies in the midstate.

He says switching out generics for name brand drugs can save an average of 60 to 80 percent to consumers, and he's mandated to make sure people get the best deal on their prescriptions. "In Pennsylvania, pharmacists are required to substitute the less-expensive generic product unless directed otherwise. And in a long-term care setting, every resident has on their orders, 'may use generic substitutions,' or legally, whatever the statement is."

Kray says he's seen an especially large number of consumers opting for generics within the last year. A number of name brands drugs' patents expired, meaning generics could begin offering similar, lower-cost medications.

But he says name brands still eat up a majority of costs. "Even though we might be dispensing between 80 and 90 percent generics, brands still account for about 60 percent of the overall cost, so that's how big a differential there is between brand and generic pricing."

That's in line with a trend tracked last year in a study by pharmacy benefits manager, Express Scripts. It measured drug prices from 2011 to 2012, and found the cost of name brand drugs rose, on average, 13 percent. The price of generic drugs decreased by nearly 22 percent, creating the biggest gap so far between the two.

The federal Food and Drug Administration oversees the approval of generic drugs for sale and says they have the same "high quality, strength, purity, and stability" as name brand drugs. Many doctors and pharmacists are champions of generics because of their effectiveness and comparatively low cost to name brands.

Hengameh Hosseini, assistant professor of healthcare administration at Penn State Harrisburg, contends buying generics can make sense for budget-conscious consumers in the short term. But she says it's sometimes hard to convince patients generics can work the same way as name brands do, especially if they've been using the drugs for a long time.

And she's skeptical that switching to generics can make a real dent in lowering health care spending overall, since prescription drugs are so widely used. "In the long-term, really, the costs are not going to be that low because the demand for generic drugs is going to increase. It's supply and demand."

Hosseini says she doesn't necessarily think Americans are over-medicated. Instead, she says, strict FDA drug approval guidelines and lengthy decade-long research and development phases drive up costs. "The reason for high costs of brand names is they have a great deal of research and development costs. This means the same money we sepnd today discovering brand name drugs would be spent on the creation of generic drugs."

Hosseini says if people want access to large numbers of highly-regulated, safe prescription drugs--generic or name brand--they have to accept the costs, whatever they may be. She adds if policymakers are interested in keeping costs down over the long term, they should look at other ways to do it, like expanding care to low-income individuals, or revamping funding for older adults' health care.

Chuck Kray in Hershey is a bit more optimistic about just how much generic drugs can keep costs down.

He says with Americans battling more chronic conditions, like heart disease and diabetes, generic drugs are going to be increasingly important in keeping people well at a lower cost.

And he says he's got a litmus test for anyone wondering whether to buy brand name or generic. "My thought is always to ask the pharmacist, 'Would you take this generic?' And if he isn't going to say yes, then you probably don't want it either. I only take generics, and to show you the other side of the story, my wife likes the brand names for most of her meds."

The United States spent 10 percent of its health care costs on prescription drugs in 2010.

*This report is part of witf's multimedia initiative, Transforming Health.

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