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Savings From Generic Drugs Purchased at Retail
Pharmacies
Generics have long offered a safe and inexpensive alternative to
many brand-name drugs. Using average national retail price data from
IMS Health’s National Prescription Audit PlusTM,
we calculate the per-day drug costs for several different
hypothetical patients. We show that the drug costs per day can fall
by 14 to16 percent if patients use generics instead of branded
drugs, depending on their medical needs. Patients whose needs can be
fully satisfied with generics could enjoy reductions of 52 percent
in the daily costs of their medications.
For this analysis we use the average national retail price of
drugs in brick-and-mortar pharmacies (i.e. chain, independent and
foodstore pharmacies, excluding internet, mail order and long-term
care pharmacies), a measure that averages pharmacies’ revenues
from uninsured customers, insured customers, and Medicaid
beneficiaries alike. This measure of average national retail price
would generally be lower than the retail prices paid by the
uninsured. Our use of this measure implies that the savings are
interpretable as total cost savings—including to Medicaid and
insurance companies—and not necessarily out-of-pocket savings to
patients.
We examine six hypothetical patients, and calculate two costs for
each patient. The first cost estimate is for the case where all
drugs are branded products. The second cost estimate is for the case
where the patient buys generic versions if they are available. The
six hypothetical patients include one who is prescribed only
off-patent products, two who are prescribed only on-patent products,
and three that are prescribed a mix of both.
Table 1 below lists the specific drugs and strengths. Using
dosing information also presented below, we calculate average daily
drug costs from prescription price data for the first quarter of
2004, taken from IMS’s NPA PlusTM data on
brick-and-mortar retail pharmacies. For example, the average price
of a 5 mg pill of Norvasc is $1.62, so that the average daily drug
costs (including costs to all third party payers) for this daily
dose of Norvasc would be $1.62.
This analysis includes several caveats. First, these hypothetical
patients are chosen to be illustrative and thus may not be fully
representative of the medical needs of a given individual or
population. Second, generic prices available to the average consumer
may be significantly lower than the median prices reported here.
While the median prices are less influenced by outliers than
arithmetic means, averages weighted by volume may be a better
measure of the price that the typical consumer pays. Weighted
averages would give greater importance to manufacturers with high
sales volumes relative to smaller manufacturers. Since the low-price
manufacturers are likely to sell larger volumes of drugs, the
weighted average price may be less than the median price reported
here. Finally, savings from generics will increase as more patents
expire. For example, FDA approved a generic competitor to Paxil at
the end of the period when these price data were collected, so
patient #2 may enjoy some savings in the future.
The maximum savings occur when the most generics are prescribed (Scenario 1), and no savings can occur when only on-patent products
are prescribed (Scenarios 2 and 3). This can occur when all drugs
available with the desired active ingredient in a given dosage form
are patented. However, even when generic drugs make up only a
portion of the drugs prescribed, savings of 14-16 percent can be
realized (Scenarios 3-6).
Table 1: Potential Savings From Generic
Drugs
Hypothetical Patient |
Conditions |
Drugs (Brand Name/Generic where available) |
Dosing(1) |
Retail Cost Per Day (all brand)(2) |
Retail Cost Per Day (brand/generic where
available) (3) |
Generic Savings ($) |
Generic Savings (% of total spending) |
|
|
|
|
|
|
|
|
Scenario #1 |
Market Basket Total |
|
|
$5.79 |
$2.77 |
$3.02 |
52.1% |
|
Asthma |
(Ventolin/albuterol) (4) |
2 puffs every 4-6 hours as needed |
$1.44 |
$0.69 |
$0.75 |
52.3% |
|
Hypertension |
(Prinivil/lisinopril) |
20 mg per day |
$1.16 |
$0.60 |
$0.57 |
48.5% |
|
Diabetes |
(Glucophage/metformin) |
850 mg twice daily |
$2.81 |
$1.29 |
$1.52 |
54.1% |
|
Congestive Heart Failure |
(Lasix/furosemide) |
40 mg per day |
$0.38 |
$0.20 |
$0.18 |
47.1% |
|
|
|
|
|
|
|
|
Scenario #2 |
Market Basket Total |
|
|
$12.13 |
$12.13 |
$0.00 |
0.0% |
|
Osteoarthritis |
Celebrex |
200 mg per day |
$3.03 |
$3.03 |
$0.00 |
0.0% |
|
Hypercholesterolemia |
Zocor |
40 mg per day |
$4.54 |
$4.54 |
$0.00 |
0.0% |
|
Depression |
Paxil |
20 mg per day |
$2.93 |
$2.93 |
$0.00 |
0.0% |
|
Hypertension |
Norvasc |
5 mg per day |
$1.62 |
$1.62 |
$0.00 |
0.0% |
|
|
|
|
|
|
|
|
Scenario #3 |
Market Basket Total |
|
|
$16.05 |
$16.05 |
$0.00 |
0.0% |
|
Schizophrenia |
Zyprexa |
10 mg per day |
$9.76 |
$9.76 |
$0.00 |
0.0% |
|
Hypercholesterolemia |
Lipitor |
40 mg per day |
$3.55 |
$3.55 |
$0.00 |
0.0% |
|
Depression |
Zoloft |
50 mg per day |
$2.74 |
$2.74 |
$0.00 |
0.0% |
|
|
|
|
|
|
|
|
Scenario #4 |
Market Basket Total |
|
|
$8.13 |
$6.93 |
$1.20 |
14.7% |
|
Anti-coagulant |
(Coumadin/warfarin) |
2.5 mg per day |
$0.87 |
$0.58 |
$0.30 |
33.8% |
|
Hypertension |
(Vasotec/enalapril) |
20 mg per day |
$1.71 |
$0.81 |
$0.90 |
52.8% |
|
Osteoarthritis |
Vioxx |
25 mg per day |
$3.00 |
$3.00 |
$0.00 |
0.0% |
|
Osteoporosis |
Fosamax |
70 mg per week |
$2.55 |
$2.55 |
$0.00 |
0.0% |
|
|
|
|
|
|
|
|
Scenario #5 |
Market Basket Total |
|
|
$14.25 |
$11.98 |
$2.27 |
15.9% |
|
Asthma |
(Ventolin/albuterol) (3) |
2 puffs every 4-6 hours as needed |
$1.44 |
$0.69 |
$0.75 |
52.3% |
|
Diabetes |
(Glucophage/metformin) |
850 mg twice daily |
$2.81 |
$1.29 |
$1.52 |
54.1% |
|
Diabetes |
Actos |
30 mg per day |
$5.45 |
$5.45 |
$0.00 |
0.0% |
|
Hypercholesterolemia |
Pravachol |
40 mg per day |
$4.55 |
$4.55 |
$0.00 |
0.0% |
|
|
|
|
|
|
|
|
Scenario #6 |
Market Basket Total |
|
|
$11.32 |
$9.50 |
$1.82 |
16.1% |
|
Hypertension/mild congestive heart failure |
(Zestril/lisinopril) |
20 mg per day |
$1.28 |
$0.60 |
$0.68 |
53.1% |
|
Coronary artery disease; congestive heart failure |
(Toprol XL/metoprolol) |
200 mg per day/ 100 mg twice a day |
$1.96 |
$0.82 |
$1.14 |
58.2% |
|
Hypercholesterolemia |
Lipitor |
40 mg per day |
$3.55 |
$3.55 |
$0.00 |
0.0% |
|
Acid Reflux |
Aciphex |
20 mg per day |
$4.53 |
$4.53 |
$0.00 |
0.0% |
(1) All medication is taken once per day unless otherwise
noted. |
(2) Prices are average retail prices in brick-and-mortar
pharmacies (i.e. chain, independent and foodstore pharmacies,
excluding internet, mail order and long-term care pharmacies)
across all payer types (cash-only, Medicaid and other 3rd
party payers) for the first quarter of 2004. |
(3) Generic prices are calculated in the same fashion using
the median price among generic manufacturers. A weighted
average price would have been preferable, but no prescription
volume data were available at the time by which to weight the
different manufacturers. |
(4) Patients using albuterol are assumed to need 7 puffs on
an average day. |
Data Source: IMS Health, National Prescription Audit PlusTM;
1st Quarter 2004; extracted April 2004; analysis
conducted by the FDA. |
Consumer Education:
Generic Drugs
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Date created: May 3, 2004 |
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