Evaluation of Economic Effects of Drug Product Selection Legislation

Drug product selection legislation is intended to achieve savings in the cost of prescription drugs without adversely affecting the quality of care by allowing pharmacists the opportunity to dispense less costly generically equivalent drug products in place of the product which had been prescribed by the physician. Various conditions under which the pharmacists are authorized by state laws to exercise theoption to substitute are discussed. The study then identifies and examines the conditions under which savings may and do occur, using the legislation in Michigan as the model. Over 60,000 acutal prescriptions were examined for the three-year period, April 1, 1974 through March 31, 1977--which covers the period of the year immediately before the legislation became effective and the two subsequent years-to determine: 1) the extent to which substitution is possible; 2) potential savings from generic substitution; and 3) very substantial potential cost savings from drug product selection, the actual savings represent only an extremely small proportion of the potential. This principally is due to the fact of the low rate of substitution among eligible prescriptions. Thus, if the gap between actual and potential savings is to be reduced, more attention must be given to affecting the pattern of drug selection among pharmacists.