Seniors' drug choices may up Medicare costs

By Matthew Perrone

Published: September 25, 2008

WASHINGTON — Seniors who switch between low-cost generic drugs and the original products based on who's footing the bill are likely driving up the cost of the government's Medicare drug plan, according to a new study.

Figures released today show more seniors ask their pharmacist for generic medications when they are paying, but choose the more expensive originals when the government covers costs.

The study was published by Medco Health Solutions Inc., a drug benefit manager that handles prescriptions for about 20 percent of Americans. Prescription benefit managers earn more money when patients choose cheaper drugs.

Although Medicare drug benefits increased national health care spending, the program's budget has actually come in below estimates, which federal officials attribute to a greater use of generic drugs and competiting insurance companies.

Generic drugs are medically indistinguishable from the original products and can cost up to 80 percent less. They account for two-thirds of all prescriptions dispensed in the U.S, according to research firm IMS Health.

However, the figures from Medco suggest some patients are still more comfortable taking medicines from the original manufacturer.

"It may be a question of education, that some people simply believe brand-name drugs work better than generics,” said Tricia Neuman, a vice president with the Henry J. Kaiser Family Foundation. Research also shows that doctors often don't talk about the potential cost savings of generic drugs, she added.

Kaiser, a nonprofit research group, estimates the average out-of-pocket expense for seniors in Medicare taking generic drugs will be $5.32 this year, nearly six times less than the $29.86 paid by seniors taking branded drugs listed by insurers.

Despite the potential cost savings, Medco found that nearly two-thirds of prescriptions initially filled by patients in Medicare were for branded medications.

The majority of seniors only switched to generics after they reached the point when users must pay the whole cost.

"Medicare beneficiaries become acutely aware of the cost difference between brand-name and generic drugs and most make the switch,” Medco's Medicare Chief Medical Officer Woody Eisenberg said.

But Medco also found that when seniors' drug costs reached the "catastrophic” phase and are again covered by Medicare, 59 percent of prescriptions are for brand name drugs, not generics.

An official from the federal Centers for Medicare and Medicaid Services said the agency could not confirm the figures cited by Medco.

Overall, the federal government and beneficiaries through their monthly premiums will spend billions on the Medicare drug benefit this year.

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