Generic Medications

With ever increasing generic drug availability, more and more Americans are seeing the value of generics and using them to help save money on their prescription drug costs. Roughly three-quarters of the drugs currently listed in the Food and Drug Administration’s Orange Book currently have generic counterparts. According to the Generic Pharmaceutical Association (GPhA), U.S. generic pharmaceutical sales increased 10 percent between 2003 and 2004 and amounted to $22.3 billion in 2005; the generic share of the pharmaceutical market is expected to grow by roughly 13 percent in 2006. This growing availability of generics is well accounted for in Medicare Part D, with all stand-alone prescription drug plans and Medicare Advantage Prescription Drug plans (MA-PDs) offering comprehensive, low-cost access to generic pharmaceuticals in 2006. In addition, all Medicare beneficiaries eligible for Medicare Part D had access to at least one prescription drug plan with some coverage in the gap in 2006, including coverage of generics during the gap. And in 2007, even more plans will offer coverage of generics in the gap.

Equally important, and again as a result of strong competition, the cost of generic drugs in the United States is very low and they are relatively widely used. The FDA notes that generic drugs typically cost 50-70 percent less than their brand-name counterparts. Further, prices for generic drugs in the U.S. are much lower than in many other countries. For example, a study by the National Opinion Research Center at the University of Chicago reported that people living in Canada pay 37 percent more for generic drugs than people in the U.S. [1] In addition, generic drugs are more widely used in the U.S. than in other countries, providing further drug cost savings. For example, during 2005, in terms of value, generic drugs accounted for less than 10 percent of the market in Austria , Belgium , Finland , France , Ireland , Italy , Portugal and Spain .[2]

The Medicare prescription drug benefit is reinforcing these trends. Generic drug prices for people with Medicare can be even lower due to the excellent coverage available through Part D. Medicare plans encourage the use of generics with tiered formularies, under which generic drug co-pays are typically far lower than co-pays for brand alternatives. Some Part D plans even offer generics for a $0 copay. As a result of very low prices and information and support for beneficiaries on how they personally can save by using generic versions of their medicines, Medicare Part D has resulted in increased use of generic drugs by Medicare beneficiaries.

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