A new CVS Caremark Corp. study has found that states scrambling to pay for rising health care costs in their Medicaid programs can save over $100 million over the next several years by changing generic substitution laws to facilitate substitutions of generic drugs for branded medications.


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CVS: Generic substitution can cut Medicaid costs

July 7th, 2010

WOONSOCKET, R.I. – A new CVS Caremark Corp. study has found that states scrambling to pay for rising health care costs in their Medicaid programs can save over $100 million over the next several years by changing generic substitution laws to facilitate substitutions of generic drugs for branded medications.

CVS Caremark said Wednesday that the study, published in the July edition of health policy journal Health Affairs, looked at the generic substitution of simvastatin for brand-name cholesterol drug Zocor over six quarters starting June 23, 2006, when Zocor's patent expired. The review examined how quickly Medicaid recipients moved to the generic equivalent medications under three state statutes: mandatory versus permissive substitution, with and without prior authorization, and with and without requiring patient approval for substitution.

The generic substitutions addressed by the study were for chemically identical generics for brand-name drugs, according to CVS Caremark. The research involved a review of Medicaid claims data between June 2006 and 2008 in 48 states and the District of Columbia.

"Requiring patients to provide consent prior to generic substitution led to an approximately 25% reduction in generic substitution," stated Dr. William Shrank, the study's lead author and an assistant professor of medicine at Harvard Medical School in the division of pharmacoepidemiology at Brigham and Women's Hospital in Boston.

During the six quarters reviewed, the study determined that states could have saved almost $20 million if the substitution from Zocor to the chemically identical simvatstatin were made more rapidly for that one medication.

"This study has important implications," Troy Brennan, executive vice president and chief medical officer at CVS Caremark, said in a statement. "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."

He noted that many branded medications are set to lose their patent protection over the next several years, which will spur the introduction of generic equivalents.

"In particular, we can expect significant activity with the upcoming patent expirations of Lipitor, Plavix and Zyprexa over the next 18 months," Brennan explained. "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 policy makers can take immediately to save money without affecting the quality of pharmacy care," he pointed out.

Brennan added that cost containment and finding ways to better manage escalating health care expenditures is critical given the current economic climate and expected expansion of state Medicaid programs in the wake of federal health care reform.

The study stems from CVS Caremark's previously announced three-year collaboration with Harvard University and Brigham and Women's Hospital to research pharmacy claims data to better understand patient behavior around medication adherence and appropriate medication use.

Earlier this year, CVS Caremark launched a Behavior Change Research Partnership with academic leaders from Carnegie Mellon University, Dartmouth College's Tuck School of Business and the University of Pennsylvania's Medical School and Wharton School of Business to develop insights into consumer actions around health challenges through the lens of behavioral economics and social marketing.

CVS Caremark said it's undertaking the studies because patient nonadherence to essential chronic medications remains a barrier to improving public health and lowering medical costs. Past studies show one-quarter of people receiving prescriptions never fill their first prescription, and patients with chronic diseases such as diabetes and coronary artery disease adhere to their ongoing medication regimen about half of the time. Nonadherence to vital medications is a frequent cause of preventable hospitalizations and patient illness, with costs to the U.S. health care system estimated at about $300 billion annually.

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