State Laws Affect Generic-Substitution Rates and Medicaid Costs, Says Study

States can reduce their Medicaid programs’ healthcare expenditures by changing laws to enable generic drugs to be substituted for branded medications more easily and quickly, according to a new study conducted by CVS Caremark, a large pharmacy healthcare provider. Such changes could save states more than $100 million during the next several years, according to the study, which was published in the July issue of Health Affairs.
 
The study examined the generic substitution of simvastatin for Merck’s (Whitehouse Station, NJ) cholesterol drug Zocor during six consecutive quarters beginning in June 23, 2006, when Zocor’s patent expired. The review tracked how quickly Medicaid recipients switched to equivalent generic medications under various kinds of state statutes (i.e., those that establish mandatory versus permissive substitution, those with and without requirements for prior authorization, and those that do and do not require patient approval for substitution). The study focused on substitutions of chemically identical generic products for brand-name drugs.
 
“Requiring patients to provide consent prior to generic substitution led to an approximately 25% reduction in generic substitution,” said the study’s lead author William H. Shrank, an assistant professor of medicine at Harvard Medical School in the division of pharmacoepidemiology at Brigham and Women’s Hospital in Boston, in a press release. States could have saved almost $20 million during the six quarters reviewed if the switch from Zocor to the chemically identical simvatstatin had been made more quickly, according to the study.
 
“This study has important implications. We determined states can stem the rising cost of medications paid for by Medicaid programs by modifying statutes to make it easier to replace brand-name medications with generics,” said Troyen A. Brennen, executive vice-president and chief medical officer of CVS Caremark, in a press release. Generic equivalents for various drugs will become available as branded therapies lose their patent protection during the next several years.
 
“In particular, we can expect significant activity with the upcoming patent expirations of Lipitor, Plavix, and Zyprexa over the next eighteen months,” said Brennen in the press release. Lipitor is Pfizer’s (New York) cholesterol medication, Plavix is Bristol-Myers Squibb’s (New York) antiplatelet therapy, and Zyprexa is Eli Lilly’s (Indianapolis) schizophrenia drug. “The study estimates state Medicaid programs can save more than $100 million on those three drugs alone by adopting regulations that allow pharmacists to make a change following the patent expiration without requiring direct patient approval. This is action that policymakers can take immediately to save money without affecting the quality of pharmacy care,” he added.
 
The CVS Caremark study reviewed Medicaid claims data between June 2006 and June 2008 in 48 states and the District of Columbia. It is a product of CVS Caremark’s three-year collaboration with Harvard University and Brigham and Women's Hospital, which researched pharmacy claims data to improve understanding of patient compliance and appropriate medication use. To analyze consumer responses to health challenges from the perspectives of behavioral economics and social marketing, the company launched a Behavior Change Research Partnership with academics from Carnegie Mellon University, Dartmouth College’s Tuck School of Business, and the University of Pennsylvania’s Medical School and Wharton School of Business earlier this year.
 
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