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News for the week of 02-09-2006

Seniors Flocking To Lower–Cost Generic Drugs In Medicare Part D
Medical News Today, 2-9-06

Editor's Notes:

One of the complaints about the Medicare prescription drug benefits is that it is a "giveaway" to the "big pharmaceutical companies" who would make a killing pushing newer, more expensive drugs to seniors.

This does not, however, appear to be happening; consumers are voting with their dollars and their feet by enrolling in plans that offer them the best mix of value and price. Unsurprisingly, this means a heavy preference for generics in many cases:

New data released today by the Centers for Medicare & Medicaid Services (CMS) showing generic–drug utilization exceeding 60 percent in Medicare Part D underscores the role of pharmacy benefit managers (PBMs) in expanding access to lower cost, clinically proven prescription drugs. PCMA is the national association representing America's pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D.

"The high generic dispensing rate in Medicare Part D—after only one year—is a testament to the collaborative efforts of patients, clinicians, PBMs, and policymakers to expand access to clinically proven, cost–effective prescription drugs," said PCMA President Mark Merritt. "Increased generic drug utilization is helping to keep Part D premiums and program costs lower than originally forecast and is helping to prevent seniors from falling into the 'donut hole' coverage gap."

In recent months, numerous data have shown the important role that increased use of generic drugs can play in lowering health care costs. A recent analysis from PricewaterhouseCoopers examined the role of generic drugs in lowering Part D spending:

—For each percentage point increase in overall generic utilization, Part D drug spending falls by an estimated $12 billion over the 2007 to 2015 period.

—If Medicare prescription drug plans were able to increase generic dispensing rate by 5 percentage points, savings could increase by $58 billion over the 2007 to 2015 period.

In addition, a recent report authored by researchers from CMS found that competition from generic alternatives and other proven management tools utilized by PBMs helped contribute to prescription drug–spending growth rate in 2005 slowing to its lowest growth rate in over a decade, rising just 5.8 percent.

This is the beauty of a market–driven system: consumers get to decide for themselves if they want to pay extra for expanded access to newer medicines. Proponents of government price negotiations want bureaucrats to make those choices for seniors, in the name of getting the lowest possible prices—a procedure that will inevitably lead to price controls and dampen incentives for pharmaceutical innovation.

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