Potential Savings from Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997–2000

BACKGROUND: Generic substitution is one mechanism of curtailing prescription drug expenditures. Limited information is available about the potential savings associated with generic substitution. OBJECTIVE: To estimate the potential savings associated with broad substitution of generic drugs. DESIGN: Cross-sectional, nationally representative survey of noninstitutionalized adults. SETTING: United States. PARTICIPANTS: Adults included in the Medical Expenditure Panel Survey Household Component, 1997-2000. MEASUREMENTS: Use of a multisource drug (that is, a drug available in a brand-name and > or =1 generic formulation) or a generic drug and the potential cost savings associated with broad generic substitution for all multisource products. RESULTS: Fifty-six percent of all outpatient drugs were multisource products, accounting for 41% of total outpatient drug expenditures. Of these multisource drugs, 61% were dispensed as a generic. If a generic had been substituted for all corresponding brand-name outpatient drugs in 2000, the median annual savings in drug expenditures per person would have been 45.89 dollars (interquartile range, 10.35 dollars to 158.06) for adults younger than 65 years of age and 78.05 dollars (interquartile range, 19.94 dollars to 241.72 dollars) for adults at least 65 years of age. In these age groups, the national savings would have been 5.9 billion dollars (95% CI, 5.5 billion dollars to 6.2 billion dollars) and 2.9 billion dollars (CI, 2.6 billion dollars to 3.1 billion dollars), respectively, representing approximately 11% of drug expenditures. LIMITATIONS: Specific information about an individual's formulary was not available, so the authors could not estimate how much of the potential savings would benefit an individual or his or her health plan. CONCLUSION: Although broad substitution of generic drugs would affect only a modest percentage of drug expenditures, it could result in substantial absolute savings.