Medicaid Skips Generic Drugs, Overspends by Millions

John Commins, March 29, 2011

State Medicaid programs spent at least $329 million more in 2009 on 20 popular brand-name drugs than they would have if they'd used lower-cost generic equivalents, according to a study from the American Enterprise Institute.

The study – Overspending on Multi-source Drugs in Medicaid  -- also projects that as much as $433 million in potential Medicaid savings could be lost in the two years when 10 "blockbuster brand drugs" lose their patent protections, unless states and the federal government press for the use of generic equivalents. 

The study from the conservative think tank examined Medicaid spending in 45 states for 20 popular prescription drugs in 2009 and found that the federal-state program "wasted" an average of $95 per prescription by failing to use therapeutically equivalent generics. That amounted to about $1.5 billion in total costs, about 22% higher than the cost of generic equivalents. The federal share of total Medicaid spending is generally about 57%.

The study's author, Alex Brill, said states and the federal government need to take action now to encourage or mandate the use of generic drugs before the federal healthcare reforms expand the Medicaid rolls by 16 million by 2019. "The subsequent increase in the size of the Medicaid drug program will result in greater waste if new policies are not implemented," Brill said.

Most of the overspending (85%) was concentrated in eight brand name drugs, including: the antipsychotic Risperdal ($60 million); anticonvulsants Lamictal ($58 million), Depakote ($40 million), Keppra ($34.6 million), and Topamax ($29.1 million); antidepressant Wellbutrin ($23.5 million); analgesic Duragesic ($22.7 million); and antiemetic Zofran ($10.3 million.) Total "waste" for these drugs was roughly $279 million, the study said.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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