State Generic Substitution Laws Can Lower Drug Outlays Under Medicaid

Abstract

To stem the rising costs of medications provided to patients enrolled in Medicaid, states have implemented varying policies about generic substitution. These policies differ in the extent to which pharmacists or patients can influence which medications they choose. Using national Medicaid data, we evaluated the relationship between different generic substitution policies and the use of generic simvastatin, a cholesterol-lowering drug, after the patent for the brand-name equivalent, Zocor, expired. States that implemented policies requiring patients’ consent prior to generic substitution experienced rates of substitution that were 25 percent lower than those of states that did not require patient consent. By eliminating patient consent requirements, state Medicaid programs could expect to save more than $100 million in coverage for three top-selling medications that are nearing patent expiration. Although these consent requirements are probably intended to increase patient autonomy, policy makers should consider the sizable opportunity costs.