More About Generic Drugs: A Trillion Dollar Finding

As we have previously noted, whenever studies are conducted in which the contents of generic drugs are analyzed and compared to brand-name drugs, the results are always the same: There is no significant difference between the amount of the active drug ingredient in the generic version compared to the amount in the brand-name version.

A recently released study by the federal Government Accountability Office reviewed all of the valid research concerning the economics of generic drug use. They found that:

• On average, the retail price of a generic drug is 75 percent lower than the retail price of a brand-name drug.
• Total savings that have accrued to the U.S. health care system from substituting generic drugs for their brand-name counterparts, from 1999 through 2010, amounted to more than $1 trillion.
• Even more money could be saved by people getting their drugs through Medicare Part D, which involves outpatient prescription drug coverage. The study documented that if generic drugs had always been substituted for the brand-name drugs studied, about $900 million would have been saved in 2007 in the Medicare Part D program alone.
• Other studies reviewed by GAO compared savings from the lower cost of generic drugs to other health care costs that could accrue from their use. Because of differing methodologies, these studies had mixed results regarding the effect of using generics, in that some found they raised health care costs, while others found they led to cost savings. 

Prescription drug spending in the U.S. reached $307 billion in 2010 —an increase of $135 billion since 2001—and made up approximately 12 percent of all health care spending in the country. Until the early 2000s, drug spending was one of the fastest-growing components of health care spending. However, since that time, the rate of increase has generally declined each year, attributable in part to the greater use of generic drugs.

All of this is an important reminder to ask your doctor and pharmacist if a generic drug is available, thereby saving large amounts of money.