GAO-12-371R Savings from Generic Drug Use

United States Government Accountability Office

Washington, DC 20548

January 31, 2012

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

Subject: Drug Pricing: Research on Savings from Generic Drug Use

Dear Senator Hatch:

Prescription drug spending in the United States reached $307 billion in 2010—an 

increase of $135 billion since 2001—1and comprised approximately 12 percent of all 

health care spending in the country. Until the early 2000s, drug spending was one of 

the fastest growing components of health care spending. However, since that time, 

the rate of increase has generally declined each year, attributable in part to the 

greater use of generic drugs, which are copies of approved brand-name drugs.2

Generic versions of brand-name drugs become available to consumers when brandname drugs’ patents and periods of market exclusivity expire and generic 

manufacturers obtain approval to market their drug.3 The competition that brandname drugs face from generic equivalents is associated with lower overall drug 

prices, particularly as the number of generic manufacturers grows and price 

competition among them increases.4 On average, the retail price of a generic drug is 

75 percent lower than the retail price of a brand-name drug.5

 

1

See IMS Institute for Healthcare Informatics, The Use of Medicines in the United States: Review of 

2010 (Parsippany, N.J.: April 2011). For the purposes of this report, we use the terms prescription 

drugs and drugs interchangeably. 

2

A brand-name drug is a drug marketed under a proprietary, trademark-protected name. For the 

purposes of this report, we use the terms generic drug and generic interchangeably. We also use the 

terms brand-name drug and brand interchangeably. 

3

Patents are issued by the U.S. Patent and Trademark Office, generally for a term of 20 years from 

the date of filing. A patent grants its owner the right to exclude others from making, using, selling, 

offering to sell, or importing the patented invention into the United States. See 35 U.S.C. § 154(a)(2). 

In the case of drugs, the patent protects the investment in the drug’s development by giving the 

manufacturer the sole right to sell the drug while the patent is in effect. 

4

While research has shown that generic drug prices decrease relative to the number of generic 

manufacturers that enter the market, research is less clear regarding the overall effect of generic 

entry on brand prices. While some studies have found that the price of a brand-name drug increases 

following generic entry, others have found that generic entry exerts a downward pressure on brand 

prices. In the latter case, while brand-name prices typically increase over time, with generic entry they 

do not increase as much as they would have otherwise. 

5

Congressional Budget Office (CBO), Effects of Using Generic Drugs on Medicare’s Prescription 

Drug Spending (Washington, D.C.: September 2010). 
 2 GAO-12-371R Savings from Generic Drug Use

Increased use of generic drugs can partly be attributed to the regulatory framework 

that was established in the Drug Price Competition and Patent Term Restoration Act 

of 1984, commonly known as the Hatch-Waxman Act.6 The Hatch-Waxman Act 

facilitated earlier, and less costly, market entry of generic drugs, while protecting the 

patent rights of brand-name drug manufacturers, to encourage continued investment 

in research and development. When the act was enacted in 1984, the generic 

utilization rate—which is the share of all drugs dispensed that are generic—was 

about 19 percent. Today it is about 78 percent for drugs dispensed in retail settings, 

such as independent, chain, and mail-order pharmacies, as well as in long-term care 

facilities.7 The generic utilization rate is expected to continue to grow over the next 

few years as a number of blockbuster drugs8

While the Hatch-Waxman Act has helped to increase the number of generic 

alternatives to brand-name drugs, other factors influence whether providers and 

consumers use generic drugs. For example, third-party payers—including private 

health insurance plans and public programs such as Medicare—

come off patent through 2015.

9

use strategies such 

as tiered copayments to encourage the use of less expensive drugs within a 

therapeutic class, which are often generics.10 Also, perceptions of the safety and 

efficacy of generic drugs may affect their use. Thus, use of generic drugs—and the 

savings realized—can vary by payer as well as across therapeutic classes. You 

asked us to identify research completed on estimates of cost savings from the use of 

generic drugs in the United States. This report summarizes the findings of peerreviewed articles, government reports, and studies by national organizations, 

including trade and nonprofit organizations, on this topic.11

To identify research completed on estimates of cost savings from the use of generic 

drugs in the United States, we conducted a structured literature review, which 

resulted in 30 articles we determined to be relevant to our objective (see the 

enclosure for a list of the articles we identified). To conduct this review, we searched 

 

6

Pub. L. No. 98-417, 98 Stat. 1585 (1984). 

7

In addition to long-term care facilities, prescription drugs can be dispensed in other institutional 

settings, such as hospitals and clinics. Complete data on the 2010 generic utilization rate were not 

publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail 

settings and long-term care facilities comprise approximately 76 percent of all prescription drug 

spending in the United States, with drugs dispensed in retail settings accounting for almost all of 

these drugs.

8

Blockbuster drugs are drugs that generate at least $1 billon in revenue per year for the company that 

manufactures them. From 2012 through 2015, 13 blockbuster drugs that account for about $78 billion 

in drug sales are expected to come off patent, including Plavix (an anti-platelet medication), Seroquel 

(an antipsychotic), and Singulair (an asthma medication).

9

Medicare is the federally financed health insurance program for persons aged 65 or over, certain 

individuals with disabilities, and individuals with end-stage renal disease. Medicare covers drugs 

dispensed in hospital inpatient settings or skilled nursing facilities through Part A and outpatient 

prescription drugs either through Medicare Part B or Part D. Part B covers physician-administered 

drugs. Part D, which went into effect in 2006, provides a voluntary outpatient prescription drug benefit 

for the Medicare program. 

10Third-party payers may use a variety of copayment structures. For example, in a common three tier 

copayment structure, enrollees pay a low copayment for generic drugs (the first tier), a higher one for 

preferred brand-name drugs (the second tier), and the highest copayment for nonpreferred brandname drugs (the third tier). A therapeutic class is defined as a group of drugs that are similar in 

chemical structure, pharmacological effect, or clinical use.

11For the purposes of this report, we use the terms articles, reports, and studies interchangeably. 
 3 GAO-12-371R Savings from Generic Drug Use

seven reference databases that included peer-reviewed journal articles and other 

periodicals to capture articles published on or between January 2000 and 

October 24, 2011.12 We used a combination of search terms related to cost savings 

from the use of generic drugs, including synonyms for generic drugs, monetary 

terms, and modifiers (see the enclosure for a complete list of the search terms). We 

determined whether an article was relevant to our objective based on whether it 

included an empirical analysis that produced estimates of cost savings from the use 

of generic drugs. We excluded articles that: (1) were not focused on the United 

States; (2) were news articles, opinion pieces, or PowerPoint presentations; or 

(3) did not describe a methodology for calculating the savings estimates. We also 

excluded articles that: (1) included estimates of cost savings involving the use of 

generic drugs, but it was unclear whether other factors also contributed to the 

savings;13 (2) analyzed differences in the prices of brand and generic drugs, but did 

not look at cost savings for a given population; or (3) focused on estimates of cost 

savings from generic versions of biologics.14 To supplement this information, we 

searched government websites, such as the Department of Health and Human 

Services’ website, for studies that met our criteria. We also searched the websites of 

national organizations, including those of trade groups, such as the Generic 

Pharmaceutical Association (GPhA), and nonprofits, such as the Kaiser Family 

Foundation. In addition, we searched the Nexis database for trade articles 

discussing cost savings from generic drugs using the same search terms as our 

review of reference databases. To help ensure our searches captured relevant 

articles, we reviewed the bibliographies of the studies we identified as relevant to 

identify other potentially relevant articles. We also interviewed officials at the 

Congressional Budget Office (CBO), GPhA, and IMS Health15

 

12The databases we searched included those with a medical or economic focus as well as those 

including articles across multiple disciplines. They were: MEDLINE, EMBASE, EMCare, EconLit, 

NTIS, SciSearch, and Social SciSearch. While we restricted our search to articles published on or 

between January 2000 and October 24, 2011, some articles identified were based on data prior to 

this time period. 

about prior work on 

estimates of cost savings from the use of generic drugs, and included any additional 

reports the officials identified if they met our criteria. We analyzed the 30 articles 

identified through our literature review to group them by topic covered and

summarized key methodological similarities and differences within and among the 

groups. However, we did not independently assess the methodologies of the 

articles, including the reliability of data used.

13Examples of such articles are those that discussed pharmacy benefit design changes to encourage 

generic use, such as the initiation of a three tier copayment structure. In these cases, the articles 

were excluded because they did not distinguish whether cost savings estimates resulted from generic 

drug use or other factors, such as the use of lower-cost brand-name drugs. 

14Biologics are products, such as vaccines, derived from living sources, such as humans, animals, 

and microorganisms. See 42 U.S.C. § 262(i). Biosimilars—or follow-on versions of biologics—are not 

subject to the Hatch-Waxman Act, and there has historically been limited market penetration of these 

products. In order to encourage a market for biosimilars, the Patient Protection and Affordable Care 

Act (PPACA) established a pathway for approval of biosimilars analogous to the Hatch-Waxman Act, 

and the Food and Drug Administration is currently developing regulations to implement the 

provisions. See Pub. L. No. 111-148, § 7002, 124 Stat. 119, 804-21 (2010).

15IMS Health is an international company that supplies the pharmaceutical and health care industries 

with market information.
 4 GAO-12-371R Savings from Generic Drug Use

We conducted our work from October 2011 to January 2012 in accordance with all 

sections of GAO’s Quality Assurance Framework that are relevant to our objectives. 

The framework requires that we plan and perform the engagement to obtain 

sufficient and appropriate evidence to meet our stated objectives and to discuss any 

limitations in our work. We believe that the information and data obtained, and the 

analysis conducted, provide a reasonable basis for any findings and conclusions in 

this product. Because we did not evaluate the policies or operations of any federal 

agency to develop the information presented in this report, we did not seek 

comments from any agency.

Results in Brief

Our review identified articles that used varying approaches to estimate the savings 

associated with generic drug use in the United States. One group of studies 

estimated the savings in reduced drug costs that have accrued from the use of 

generics. For example, a series of studies estimated the total savings that have 

accrued to the U.S. health care system from substituting generic drugs for their 

brand-name counterparts, and found that from 1999 through 2010 doing so saved 

more than $1 trillion. A second group of studies estimated the potential to save more 

on drugs through greater use of generics. For example, one study assessed the

potential for additional savings within the Medicare Part D program—which provides 

outpatient prescription drug coverage for Medicare—and found that if generic drugs 

had always been substituted for the brand-name drugs studied, about $900 million 

would have been saved in 2007. A third group of studies estimated the effect on 

health care costs of using generic versions of certain types of drugs where questions 

had generally been raised about whether substituting generic drugs for brand-name 

drugs was medically appropriate. Unlike the other two groups which focused on 

savings on drugs only, these studies compared savings from the lower cost of 

generic drugs to other health care costs that could accrue from their use, such as 

increased hospitalizations. The studies had mixed results regarding the effect of 

using these generics in that some found they raised health care costs, while others 

found they led to cost savings.

Background

In order to be approved by the U.S. Food and Drug Administration (FDA), generic 

drugs must be the same as their brand-name counterparts in the following ways: 

they must have the same active ingredient(s); the same route of administration, for 

example, a drug that is taken orally versus by injection; the same dosage form, for 

example, a pill versus a syrup; the same strength; and the same intended use.16

 

16Active ingredients include any component of a drug that is intended to provide pharmacological 

activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease. 

See 21 C.F.R. § 210.3(b)(7). 

Generic drugs also must meet FDA manufacturing standards and be bioequivalent, 

meaning that the rate and extent of absorption of generic drugs into the bloodstream 

do not show a statistically significant difference from their brand-name counterparts. 

However, bioequivalence standards set by FDA allow for variation between brand 

and generic drugs that is considered small enough for the drugs to still be 

considered interchangeable. Such variation may occur because, for example, 

generic drugs may have different inactive ingredients, such as binding materials, 

dyes, preservatives, or flavoring agents compared to brand-name drugs.
 5 GAO-12-371R Savings from Generic Drug Use

Prescription drug spending consists of payments from third-party payers, including 

private health insurance plans and public programs, and of consumers’ out-of-pocket 

costs.

Spending on Prescription Drugs

17 Most—approximately 76 percent—of drug spending in the United States is 

for drugs dispensed in retail settings and long-term care facilities, with drugs 

dispensed in retail settings accounting for almost all of these drugs. In 2010, private 

health insurance plans paid $117 billion or 45.2 percent of the $259.1 billion spent 

on retail prescription drugs.18

Figure 1: Spending on Prescription Drugs in Retail Settings by Payer Type, 2010

Public programs paid $93.3 billion, accounting for 

36 percent, and consumers paid $48.8 billion out of pocket, accounting for 

18.8 percent of the spending (see fig. 1).

Note: Prescription drugs can be dispensed in retail settings, such as independent, chain, and mail-order pharmacies, as well as 

in institutional settings, such as long-term-care facilities, hospitals, and clinics. Data on drug spending by payer type were not 

publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail settings and long-term care 

facilities comprise approximately 76 percent of all prescription drug spending in the United States, with drugs dispensed in 

retail settings accounting for almost all of these drugs.

Within public programs, federal programs accounted for 90 percent of all spending 

on prescription drugs in retail settings, with state and local spending on programs 

such as Medicaid accounting for the rest.19 Medicare was by far the biggest federal 

payer, representing 70.8 percent of all federal spending on prescription drugs. (See 

table 1 for more information on federal spending on prescription drugs.)

 

17Consumers’ out-of-pocket costs generally include direct spending by consumers for drugs not 

covered by third-party payers and cost-sharing, including copayments and deductibles, for drugs 

covered by these payers. For the purposes of this report, out-of-pocket costs do not include

consumers’ premium payments for health insurance plans. 

18Data on prescription drug spending by payer type were not publicly available for drugs dispensed in 

institutional settings.

19Medicaid is a joint federal-state program that finances health care for certain categories of lowincome individuals. Medicaid programs vary from state to state. Federal spending on prescription 

drugs includes the federal share of the cost of prescription drugs for Medicaid beneficiaries.
 6 GAO-12-371R Savings from Generic Drug Use

Table 1: Federal Spending on Prescription Drugs in Retail Settings, 2010

Payer Total spending (in billions) Percent of federal 

Medicare $59.5 70.8%

Medicaid 14.8 a 17.6

Department of Defense 6.1 7.3

Department of Veterans Affairs 2.6 3.1

Other federal spendingb 1.0 1.2

Total $84 100%

Source: GAO analysis of the Centers for Medicare & Medicaid Services’ National Health Expenditure Accounts.

Note: Prescription drugs can be dispensed in retail settings, such as independent, chain, and mail-order pharmacies, as well as 

in institutional settings, such as long-term-care facilities, hospitals, and clinics. Data on drug spending by payer type were not 

publicly available for drugs dispensed in institutional settings. However, drugs dispensed in retail settings and long-term care 

facilities comprise approximately 76 percent of all prescription drug spending in the United States, with drugs dispensed in 

retail settings accounting for almost all of these drugs.

a

Includes federal spending through Medicaid and the Children’s Health Insurance Program.

b

Includes federal spending by the Indian Health Service and through the Maternal and Child Health program. Also, includes 

spending through workers compensation programs, which are paid for with federal, state, and local funds.

While private health insurance plans accounted for the largest share of retail drug 

spending in 2010, the share paid for by public programs has grown in recent years—

increasing nearly 10 percent since 2005. The increase in public programs’ share of 

spending can largely be attributed to the implementation of Medicare Part D in 2006.

Going forward, a number of factors may affect the growth of prescription drug 

spending and the distribution of this spending across payers. The implementation of 

various provisions of the Patient Protection and Affordable Care Act, as amended 

(PPACA), may affect prescription drug coverage, use, and prices.20 Additionally, 

market factors, such as the upcoming loss of patent protection for certain 

blockbuster drugs, as well as the cost of new brand-name drugs entering the market, 

could also affect spending.

According to a report by the Department of Health and Human Services, the 

availability of generic drugs is the most important factor affecting generic drug use.

Factors that Affect Generic Drug Use

21

FDA approval is required before drugs can be marketed for sale in the United 

States, though this process differs for brand-name and generic drugs. To obtain 

FDA’s approval for a new, brand-name drug,22 manufacturers must submit a new 

drug application (NDA) containing data on the safety and effectiveness of the drug 

as determined through clinical trials and other studies.23

 

20For example, PPACA requires that uninsured individuals obtain health insurance coverage. 

Specifically, beginning in January 2014, most individuals must maintain coverage for themselves and 

their dependents, which includes employer-sponsored health plans, individual plans, and 

government-sponsored plans. Pub. L. No. 111-148, §§ 1501(b), 10106(b), 124 Stat. 119, 244-49, 

909-10 (2010), as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. 

No. 111-152, §§ 1002, 1004, 124 Stat. 1029, 1032-34 (2010) (to be codified at 26 U.S.C. § 5000A). 

Prior to enactment of the 

21See Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and 

Human Services, Expanding the Use of Generic Drugs (Washington, D.C.: Dec. 1, 2010). 

22A new drug is a new chemical formula or an approved drug prescribed for use in a new way. 

23See 21 U.S.C. § 355(b). The entity that submits an application to market a drug is referred to as a 

sponsor. We use manufacturer here because the sponsor of an application is usually a manufacturer. 
 7 GAO-12-371R Savings from Generic Drug Use

Hatch-Waxman Act, the same types of studies were required for generic drugs as for 

brand-name drugs. However, to facilitate generic entry into the market, the act 

established changes to the FDA approval process for generic drugs.24 Specifically, it 

included provisions by which manufacturers of generic drugs may submit an 

abbreviated new drug application (ANDA) to FDA.25

The Hatch-Waxman Act contained additional provisions to facilitate the entry of 

generics onto the market. First, the act accelerated the approval process for generic

drugs by allowing generic manufacturers to collect data needed for an ANDA before 

the patent on the brand-name drug expires.

The ANDA process does not 

require manufacturers to conduct, or provide evidence from, the clinical trials that 

are required of manufacturers of brand-name drugs. Rather, generic drug 

manufacturers must demonstrate that a generic drug is bioequivalent to an approved 

brand-name drug. As a result, the ANDA process is less time consuming and less 

costly than the NDA process.

26 Second, the act encouraged generic 

drug manufacturers to challenge a patent associated with an approved brand-name 

drug prior to its expiration by making the first generic manufacturer to do so eligible 

for a 180-day market exclusivity period.27 For 180 days after first marketing the drug, 

the generic manufacturer does not have competition from other generic 

manufacturers.28

 

24The Hatch-Waxman Act also made changes for brand-name drugs, for example, by establishing 

patent-term extensions to encourage drug manufacturers to invest in research and development. 

Because manufacturers of such drugs apply for and are granted patents from the Patent and 

Trademark Office before they seek approval from FDA, part of their time under patent is spent 

conducting the clinical trials necessary for FDA approval and going through the FDA approval 

process—which combined could take about 10-15 years of the 20-year patent term. The patent 

extensions were intended to offset part of the patent term that elapsed prior to the drug being 

marketed. 

The Hatch-Waxman Act has been helpful in encouraging the 

development of generic versions of brand-name drugs, as evidenced by the fact that 

25See 21 U.S.C. § 355(j).

26While the Hatch-Waxman Act accelerated the generic drug approval process, FDA’s ability to 

review ANDAs in a timely fashion may delay generic drugs’ entry to the market. We have previously 

examined FDA’s review of ANDAs, and found that from 2004 to 2008, FDA increased the number of 

ANDAs it reviewed by 42 percent; however over the same period, FDA also received a greater 

number of applications each year than it was able to review, resulting in 1,441 pending ANDAs in 

2008—a 123 percent increase since 2004. See GAO, Food and Drug Administration: FDA Faces 

Challenges Meeting Its Growing Medical Product Responsibilities and Should Develop Complete 

Estimates of Its Resource Needs, GAO-09-581 (Washington, D.C.: June 19, 2009). By the end of 

2011, FDA reported that it had a backlog of about 2,500 ANDAs. 

27One example of a patent challenge is when a generic drug manufacturer asserts that the brandname patent is invalid. For example, a generic manufacturer may argue that a patent is invalid 

because the patent was duplicative and therefore improperly granted. When a patent is challenged, 

the brand-name manufacturer has the right to bring the generic manufacturer to court where the 

challenge is decided through either a court decision or a settlement; if the brand-name manufacturer 

does not bring a lawsuit, the generic manufacturer may immediately begin marketing the drug after 

receiving FDA approval. The Federal Trade Commission has alleged that there have been 

anticompetitive patent agreements between brand-name and generic drug manufacturers. In 

particular, it has raised issue with “pay-for-delay” agreements in which a brand-name manufacturer 

agrees to pay a potential generic competitor to delay marketing the generic drug. 

28Multiple generic manufacturers may qualify for the 180-day market exclusivity if several ANDA 

applicants file a substantially complete application on the same day.
 8 GAO-12-371R Savings from Generic Drug Use

in the early 1980s, 35 percent of top-selling drugs with expired patents had generic 

versions available, but by the late 1990s almost all had generics available.29

Once generic drugs are approved by FDA, providers and consumers may substitute 

them for their bioequivalent, brand-name counterparts; we refer to this process as 

generic substitution. They also may substitute generic drugs for brand-name drugs 

that are not bioequivalent, but are within the same therapeutic class, which we refer 

to as therapeutic substitution. While generic substitution is generally considered 

medically appropriate,30

• State generic substitution laws: States are responsible for regulating the practice 

of pharmacy. Consequently, there is variation among state requirements with 

respect to dispensing generics. For example, some states require pharmacists to 

practice generic substitution, unless the prescribing physician indicates that only 

the brand-name drug may be dispensed. Other states allow, but do not require, 

pharmacists to substitute generic drugs if the prescriber does not specify brandname only. Additionally, some states require pharmacists to notify or get consent 

from consumers prior to substituting generic drugs, while others do not.

there are a number of circumstances under which 

therapeutic substitution may not be appropriate. For example, some drugs in a 

therapeutic class either may be more effective than others for certain individuals or 

may not be safe for people with complicating health conditions. Taken together, 

generic and therapeutic substitution make up the generic utilization rate (that is, the 

share of all drugs dispensed that are generic), which may be affected by a number 

of factors, including:

31 In the 

case of therapeutic substitution, a pharmacist cannot substitute between drugs; 

rather a physician must make the decision to prescribe a generic.

• Pharmacy benefit management: Federal programs and private health insurance 

plans have implemented strategies to help encourage the use of generic drugs 

by their beneficiaries or members. Their strategies include tiered copayments, 

where generic drugs have a lower copayment than brand-name drugs; steptherapy, where consumers are required to try the most cost-effective drug in a 

therapeutic class first, usually a generic; generic-only coverage; offering free 

samples of generic medications; financial incentives for physicians and 

pharmacists to choose generics; and educational efforts to describe the benefits 

of using generic drugs, which may be targeted at both physicians and 

consumers. 

• Perceptions of generic drugs’ safety and efficacy: Physicians, pharmacists, and 

consumers may have perceptions about the safety and efficacy of generic drugs 

compared to brand-name drugs, which in turn affect what drugs they choose to 

use. These perceptions are based on a number of factors, including prior 

 

29CBO, How Increased Competition from Generic Drugs has Affected Prices and Returns in the 

Pharmaceutical Industry (Washington, D.C.: July 1998). 

30While rare, there are circumstances in which consumers may medically require the brand-name

version of a drug, such as if they are allergic to an inactive ingredient found in the generic version. 

31See Office of the Assistant Secretary for Planning and Evaluation, 2010 (citing 

Epilepsy.com/Professionals. State Law or Statutes Governing Generic Substitution by Pharmacists, 

Apr. 25, 2007, at http://professionals.epilepsy.com/page/statutes_by_pharmacists.html.)
 9 GAO-12-371R Savings from Generic Drug Use

experience, results of relevant studies, or advertising. Negative perceptions of 

generic drugs may be more common where questions have been raised about 

the medical appropriateness of generic or therapeutic substitution. For example, 

there is controversy within the health care community about whether generic 

substitution is appropriate for drugs for which there are relatively small 

differences between the therapeutic dose and doses that could lead to serious 

treatment failure or serious adverse drug reactions. These drugs are referred to 

as having a narrow therapeutic index (NTI) and are commonly understood to 

include anti-epileptic drugs, thyroid drugs, and immunosuppressant drugs.32

While the overall generic utilization rate was 78 percent in 2010 for drugs dispensed 

in retail settings and long-term care facilities, the rate at which generic drugs were 

substituted for brand-name drugs when a generic equivalent was available was 

93 percent.33 Thus, additional savings from generic drugs are likely to come mostly 

from an increase in therapeutic substitution, in which a generic is substituted for a 

brand-name drug that is not bioequivalent. Savings could also come from an 

increase in the percentage of the prescription drug market that is available for 

generic substitution, that is from more brand-name drugs gaining generic 

counterparts. In 2010, 26 percent of drugs dispensed in retail settings and long-term 

care facilities consisted of brand-name drugs that did not have generic 

counterparts.34

Research Used Varying Approaches to Estimate the Savings Associated with 

Generic Drug Use

Our review found that research used varying approaches to estimate the savings 

associated with generic drug use in the United States. One group of studies 

estimated the savings in reduced drug costs that have accrued from the use of 

generics, while a second group of studies estimated the potential to save more on 

drugs through greater generic use. Additionally, we identified a third group of studies 

that estimated the effect of using generic versions of certain types of drugs on health 

care costs. 

We identified a group of studies that estimated the savings in reduced drug costs 

that have accrued from the use of generics. The estimates of cost savings varied, in 

part because the studies ranged in scope. For example, some looked only at generic 

substitution, while others focused on both generic and therapeutic substitution. 

Additionally, the period of observation varied among the studies as did the 

population of interest. While we identified a series of studies that examined savings 

to the U.S. health care system as a whole, most other studies focused on savings 

accrued from the implementation of a program to encourage generic drug use or for 

Cost Savings Accrued from the Use of Generic Drugs

 

32FDA does not currently designate specific drugs as NTI drugs and, in approving ANDAs, FDA uses 

the same bioequivalence standards for drugs with a wide therapeutic index and NTI drugs. FDA has 

historically stated that different standards were not needed; however, the agency has recently 

decided to revisit this issue. See, FDA, Summary Minutes of the Advisory Committee for 

Pharmaceutical Science and Clinical Pharmacology (Silver Spring, Md.: July 26, 2011). 

33IMS Institute for Healthcare Informatics, 2011.

34IMS Institute for Healthcare Informatics, 2011. 
 10 GAO-12-371R Savings from Generic Drug Use

a specific population. The studies also calculated savings in different ways. Methods 

included estimating the difference between the total amount paid for generic drugs 

over a specified time period with the amount that would have been paid if brandname drugs had been used instead and comparing differences in drug costs with 

and without the implementation of a program to encourage generic use. Examples of 

studies that looked at cost savings accrued include the following:

• A series of studies conducted for GPhA by IMS Health estimated the total 

savings generic substitution provided to the overall U.S. health care system for 

the 12-year period 1999 through 2010.35 The reports found that during this 

period, generic substitution has saved the U.S. health care system more than 

$1 trillion. In 2010 alone, generic substitution generated more than $157 billion in 

savings.36 These reports are the most current and comprehensive analyses of 

cost savings accrued from generic drugs.37 The analyses estimated differences in 

the total amount paid for generic and brand-name drugs for the U.S. retail and 

institutional prescription drug market. In calculating savings, the price of brandname drugs before generic entry into the market was used. An IMS official we 

interviewed explained that IMS used this approach because generic entry can 

affect brand prices.38

• A 2010 CBO study examined savings as a result of generic substitution in the 

Medicare Part D Program.39 Using Part D claims data, the study found that 

dispensing generic drugs rather than their brand-name counterparts reduced 

total Part D prescription drug costs in 2007 by about $33 billion.40

 

35GPhA, Savings: An Economic Analysis of Generic Drug Usage in the U.S. (September 2011); 

GPhA, Savings Achieved through the Use of Generic Pharmaceuticals, 2000-2009 (July 2010); 

GPhA, Economic Analysis: Generic Pharmaceuticals 1999-2008—$734 Billion in Health Care 

Savings (May 2009). 

The study 

noted the difficulty associated with establishing the exact share of savings that 

accrued to the Part D program versus its enrollees. Thus, CBO estimated the 

proportion of savings accrued to each as being the same proportion as their total 

36GPhA, 2011. 

37A previous analysis of cost savings accrued from generic drugs to the overall U.S. health care 

system was conducted by CBO, but was based on data from 1994 when fewer generic drugs were 

used. The CBO report, entitled “How Increased Competition from Generic Drugs Has Affected Prices 

and Returns in the Pharmaceutical Industry,” used data from approximately 70 percent of prescription 

sales through U.S. retail pharmacies and estimated that generic substitution saved approximately 

$8 billion to $10 billion.

38The IMS official explained that they used the brand-name price prior to generic entry, as sometimes 

brand manufacturers increase their prices when generics enter the market. One explanation for this 

practice is that if some, less price-sensitive consumers perceive the quality of brand-name drugs to 

be better than their generic competitors, they will purchase the brand-name drugs even at higher 

prices. Thus, the official stated that using brand prices before generic entry provides a more reliable 

way of estimating the savings associated with generics, because the analysis is not affected by these 

price changes. 

39CBO, 2010.

40Health care claims generally refer to charges submitted by physicians, hospitals, pharmacies, or 

other providers for the sale of drugs, among other services, to private health insurance plans or public 

programs. In the case of Medicare Part D, private health insurance plans typically contract with the 

Centers for Medicare and Medicaid Services to provide coverage for beneficiaries and submit claims 

to the Part D program. 
 11 GAO-12-371R Savings from Generic Drug Use

payments to Part D plans and pharmacies in that year. As a result, CBO 

estimated that approximately 72 percent ($24 billion) of savings accrued to the 

Part D program and 28 percent ($9 billion) to enrollees. In contrast to the GPhA 

reports, CBO calculated cost savings assuming that generic entry is not likely to 

have a substantial effect on the price of the brand-name drug and used the 

prices of brand drugs in 2007 in conducting its analysis. CBO officials we 

interviewed explained that they made this assumption because there is 

conflicting evidence as to the effect of generic entry on brand-name drug prices.

• A third article looked at cost savings accrued from the implementation of a 

program to promote increased use of generic drugs in a large managed care 

organization.41 Using claims data, the study compared those physicians who 

participated in the program in 2005 and 2006 to those who did not and found that 

the program produced drug cost savings through an increase in both generic and 

therapeutic substitution. After program expenses, the program saved the 

organization $397,486 in 2005 and $453,545 in 2006.42

• A fourth study looked at cost savings accrued from the implementation of a policy 

to promote the use of a generic antidepressant over its brand-name counterpart 

in a Department of Veterans Affairs (VA) hospital.43 Using VA data and 

estimating differences in the total amount paid for the generic and brand-name 

versions of the drug, the study found that from March 2002-August 2004, the 

policy resulted in a total of $2.5 million in savings.

We identified a second group of studies that estimated the potential to save more on 

drugs through greater use of generics. Similar to research on cost savings accrued, 

while the research found that additional savings opportunities exist, the extent of the 

savings varied by study scope. Most of the studies identified focused on the potential 

cost savings from increasing generic substitution within a given population. 

However, studies also estimated the potential cost savings from greater therapeutic 

substitution or policies to encourage generic drug use, as well as the costs 

associated with delayed entry of generic drugs into the marketplace. Articles in this 

group also differed in population of interest and the number of drugs studied. Studies 

generally calculated potential savings by estimating the difference between the total 

amount paid for brand-name drugs over a specified time period with the amount that 

would have been paid if generic drugs had been used instead. Additionally, while 

most studies assumed a 100 percent substitution rate in conducting these 

calculations, others assumed varying levels of substitution. Studies that used a 

100 percent substitution rate may have overestimated savings potential, as reaching 

Potential Cost Savings from Greater Generic Drug Use

 

41A managed care organization is a health care organization that emphasizes standardized treatment 

protocols, case management, and controlled access to care. 

42A.B. Scott, E.J. Culley, and J. O’Donnel, “Effects of a Physician Office Generic Drug Sampling 

System on Generic Dispensing Ratios and Drug Costs in a Large Managed Care Organization,” 

Journal of Managed Care Pharmacy, vol. 13, no. 5 (2007), 412-419. 

43S.K. Dobscha, L.M. Winterbottom, and L.S. Snodgrass, “Reducing Drug Costs at a Veterans Affairs 

Hospital by Increasing Market-share of Generic Fluoxetine,” Community Mental Health Journal, 

vol. 43, no. 1 (February 2007), 75-84. 
 12 GAO-12-371R Savings from Generic Drug Use

this level of substitution is likely unrealistic and, particularly in the case of therapeutic 

substitution, not always medically appropriate. Examples of studies that looked at 

potential cost savings include the following:

• One study estimated that potential national savings from increasing generic 

substitution from about 61 percent to 100 percent would have been 

approximately $9 billion for adults in 2000.44 The estimate was based on patientreported estimates of drug prices using a nationally representative sample from 

the Medical Expenditures Panel Survey Household Component and included all 

payer types.45

• Another study estimated that Medicaid’s potential cost savings from increasing 

generic substitution from 81 percent to 100 percent for 20 popular brand drugs 

was $329 million in 2009.46 The study was based on Medicaid drug utilization 

data and incorporated the price impact of drug manufacturer rebates to state 

Medicaid programs into its calculations.47

• The 2010 CBO study, in addition to estimating cost savings accrued in the 

Medicare Part D program, assessed the potential for additional savings from 

generic and therapeutic substitution, and found that if substitution rates had been 

100 percent, about $900 million would have been saved from generic substitution 

and $4 billion from therapeutic substitution in 2007.48 Potential cost savings 

calculations from therapeutic substitution were for seven therapeutic classes and 

incorporated rebate data.49

 

44J.S. Haas, K.A. Phillips, E.P. Gerstenberger, and A.C. Seger, “Potential Savings from Substituting 

Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 1997-2000,” Annals of 

Internal Medicine, vol. 142, no. 11 (June 2005), 891-897.

45The Medical Expenditure Panel Survey Household Component collects data, including prescriptions 

filled, from individual households and their members and is supplemented by data from their medical 

providers. 

46A. Brill, “Overspending on Multi-Source Drugs in Medicaid,” American Enterprise Institute for Public 

Policy Research (March 2011). 

47In general, in order to have their drugs covered by Medicaid, manufacturers are required to pay 

states rebates, calculated based on a statutorily defined formula, on outpatient drugs that are 

dispensed to the states’ Medicaid patients. As of January 1, 2010, PPACA increased the rebate 

percentage for this formula from 15.1 percent to 23.1 percent of the average manufacturer price 

(AMP) for most brand-name drugs and from 11 percent to 13 percent of the AMP for generic drugs. 

Pub. L. No. 111-148, § 2501, 124 Stat. 119, 306-10 (2010) (codified at 42 U.S.C. § 1396r-8). 

However, as this study was based on 2009 data, the rebate percentages in place prior to PPACA 

applied. While this study incorporated the price impact of drug manufacturer rebates on state 

Medicaid programs in its calculations, some studies that looked at savings to the Medicaid program 

did not.

48CBO, 2010. Actual generic and therapeutic substitution rates for 2007 were not included in the 

report. 

49The seven therapeutic classes that CBO examined accounted for only 17 percent of total 

prescription drug costs in 2007. Thus, potential savings from therapeutic substitution could have been 

higher to the extent that other classes also present opportunities for therapeutic substitution. 

However, the authors also noted that savings could have been lower, because in many cases it would 

not have been medically appropriate to switch a prescription. The authors took rebate data into 

account only in calculating savings from therapeutic substitution, stating that outside of the Medicaid 

program, rebates are generally only given for brand-name drugs that do have generic counterparts. 
 13 GAO-12-371R Savings from Generic Drug Use

• An industry report conducted by Express Scripts, a pharmacy benefit manager, 

also estimated the potential savings from increasing generic and therapeutic 

substitution among its members and found it to be over $20 billion in 2005; 

however the study did not separate the savings associated with each type of 

substitution.50 The potential savings estimate was for six therapeutic classes and 

used company claims data from 48 states.51 The savings opportunity for each of 

the 48 states was estimated by therapeutic class as the difference in actual total 

costs given each state’s 2005 generic utilization rate and what costs would have 

been if the state were able to reach the generic utilization targets for that class.52

• Another study examined the effect of states’ generic substitution laws on 

Medicaid spending.53 The study estimated that for one cholesterol-lowering drug, 

the program could have saved approximately $20 million in the 15 months 

following patent expiration if all states that had a generic substitution policy 

requiring patient consent eliminated the policy. To calculate potential savings, the 

study used 2006-2007 Medicaid drug utilization data and compared actual 

generic savings between states that did not require patient consent and those 

that did.

• A sixth study examined the cost to Medicaid of delayed generic drug entry to 

market of three case study drugs.54 This study used Medicaid drug utilization 

data and calculated that if generic drugs had been available and fully substituted 

at their lowest cost upon the expiration of patent protection, Medicaid could have 

saved more than $1.5 billion from 2000 to 2004 for these three drugs.55

 

50E. Cox, A. Behnm, and D. Mager, “2005 Generic Drug Usage Report,” Express Scripts (2005). 

Pharmacy benefit managers administer the prescription drug benefits of health insurance plans on 

behalf of plan sponsors. Their services can include negotiating with manufacturers to lower the price 

that plans pay for prescription drugs and developing and managing preferred drug lists. Express 

Scripts is one of the largest pharmacy benefit managers in the United States with at least 3 million 

members at the time this study was conducted. 

51The six therapeutic classes represented 40 percent of all drug spending for the study population. 

52The generic utilization targets were estimated by Express Scripts’ clinical pharmacists by evaluating 

the clinical efficacy and market dynamics of branded and generic medications across the six 

therapeutic classes selected for the study. Among the six therapeutic classes, generic utilization 

targets in 2005 ranged from 70 percent for anti-hyperlipidemics to 95 percent for gastrointestinals, 

calcium channel blockers, and non-steroidal anti-inflammatory drugs. 

53W.H. Shrank, N.K. Choudhry, J. Agnew-Blais, A.D. Federman, J.N. Liberman, J. Liu, A.S. 

Kesselheim, M.A. Brookhart, and M.A. Fischer, “State Generic Substitution Laws Can Lower Drug 

Outlays Under Medicaid,” Health Affairs, vol. 29, no.7 (July 2010), 1383-1390.

54A.S. Kesselheim, M.A. Fischer, and J. Avorn, “Extensions of Intellectual Property Rights and 

Delayed Adoption of Generic Drugs: Effects on Medicaid Spending,” Health Affairs, vol. 25, no.6 

(November/December 2006), 1637-1647.

55The study noted that generic drugs can be delayed from reaching the U.S. market if, for example, 

manufacturers obtain patents on changes to the existing brand-name drug, including modified forms 

of the same drug, new delivery systems for the drug, and new uses of the drug. 
 14 GAO-12-371R Savings from Generic Drug Use

We identified a third group of studies that estimated the effect on health care costs 

of using generic versions of certain types of drugs where questions had generally 

been raised about whether substituting generic drugs for brand-name drugs was 

medically appropriate; the research found mixed results about whether generic 

drugs lowered health care costs in these circumstances. Unlike the research 

discussed above, which focused on savings on drugs only, this research compared 

savings from the lower cost of generics to other health care costs that might accrue 

from their use, such as increased hospitalizations, emergency department visits, or 

physician visits. These studies were generally limited to particular types of drugs 

where the medical appropriateness of generic or therapeutic substitution has been 

debated. Studies that looked at generic substitution focused on NTI drugs, whereas 

studies that looked at therapeutic substitution did not focus on NTI drugs. For 

example, studies that looked at therapeutic substitution examined selective 

serotonin reuptake inhibitors (SSRIs), which are currently among the most widely 

prescribed antidepressants in the United States.

Effect of Using Generic Versions of Certain Types of Drugs on Health Care Costs

56 Most studies used a regression 

analysis for the estimate to account for the potential impact of confounding variables, 

such as comorbidities on health care costs.57

• One study examined claims data between 1996 and 2004 for renal transplant 

patients in eight private health insurance plans to examine the effect of generic 

substitution of an NTI immunosuppressant drug on health care costs.

In addition to drugs studied, the articles 

varied by a number of factors, including period of observation, health care costs 

measured, selection of confounding variables, and whether patients initiated therapy 

with a generic drug or switched from a brand drug to a generic drug midtreatment. 

Examples of studies that looked at the effect of using generic versions of certain 

types of drugs on health care costs include the following:

58 The study 

found that total health care costs 12 months after transplantation were higher for 

those initiating therapy with the generic immunosuppressant drug at $36,482 

versus the brand version of the drug at $32,171. This study did not find a 

difference in hospitalization or physician costs. Rather, the study found that the 

main reason for the difference in health care costs was the cost associated with 

needing higher doses of the generic drug or additional immunosuppressants 

needed to maintain the transplanted kidney in patients using the generic.

 

56SSRIs are not NTI drugs. However, concerns have been raised about therapeutic substitution of 

these drugs due to some studies suggesting that there are therapeutic differences between SSRIs. 

57In general, regression analyses measure the relationship between independent variables, which in 

this case includes drug type, and the dependent variable, which in this case is health care costs. In 

measuring the relationship between an independent variable and a dependent variable, regression 

analyses account for other variables that could affect the relationship between the two, also known as 

confounding variables. Comorbidities are the presence of one or more diseases or conditions in 

addition to a primary disease or condition. 

58J.H. Helderman, N. Kang, A.P. Legorreta, and J.Y. Chen, “Healthcare Costs in Renal Transplant 

Recipients Using Branded versus Generic Ciclosporin,” Applied Health Economics and Health Policy, 

vol. 8, no. 1 (2010), 61-68.
 15 GAO-12-371R Savings from Generic Drug Use

• A second study used claims data from 1998 for approximately 2,300 privately 

insured patients to determine the effect of generic substitution of an NTI 

anticoagulant drug when a switch occurred midtreatment.59 The study compared 

treatment costs associated with using the brand and generic version of the drug 

and found that, based on data from 90 days before and the 90 days after the 

switch, the difference in total costs associated with the brand and generic 

anticoagulant drug was $3,128 less per 100 patient years for the generic.

• Another study used claims data from about 45 private health insurance plans 

from 2003 to 2007 to compare health care costs over 6 months in patients using 

brand and generic SSRIs when therapeutic substitution occurred midtreatment.60

The study found that, on average, compared with patients who remained on 

brand-name drugs, patients who switched to generic drugs experienced an 

increase of $881 in total health care costs. Among other factors leading to the 

increased costs, patients who switched from brand-name drugs to generic drugs 

had higher rates of hospitalizations and emergency department visits than did 

patients who remained on the brand-name drug.

• A fourth study reached a different conclusion about the effect of using generic 

SSRIs, when patients began treatment with a generic drug.61 This study used 

claims data from 2005 to 2007 and compared health care costs for a 6-month 

period in patients in about 100 private health insurance plans. The study 

concluded that the total health care costs of patients using generic 

antidepressants were significantly lower than costs of patients using brand 

antidepressants, with an average of $3,660 and $4,587 respectively.

As agreed with your office, unless you publicly announce the contents of this report 

earlier, we plan no further distribution until 30 days from the report date. At that time, 

we will send copies to other interested parties. In addition, the report will be available 

at no charge on the GAO website at http://www.gao.gov. If you or your staff have 

 

59D.M. Witt, D.J. Tillman, C.M. Evans, T.V. Plotkin, and M.A. Sadler, “Evaluation of the Clinical and 

Economic Impact of a Brand Name-to-Generic Warfarin Sodium Conversion Program,” 

Pharmacotherapy, vol. 23, no. 3 (2003), 360-368.

60E.Q. Wu, A.P. Yu, V. Lauzon, K. Ramakrishnan, M. Marynchenko, R. Ben-Hamadi, S. Blum, and 

M.H. Erder, “Economic Impact of Therapeutic Substitution of a Brand Selective Serotonin Reuptake 

Inhibitor with an Alternative Generic Selective Serotonin Reuptake Inhibitor in Patients with Major 

Depressive Disorder,” The Annals of Pharmacotherapy, vol. 45 (April 2011), 441-451.

61A. Vlahiotis, S.T. Devine, J. Eichholz, and A. Kautzner, “Discontinuation Rates and Health Care 

Costs in Adult Patients Starting Generic Versus Brand SSRI or SNRI Antidepressants in Commercial 

Health Plans,” Journal of Managed Care Pharmacy, vol. 17, no. 2 (March 2011), 123-132.
 16 GAO-12-371R Savings from Generic Drug Use

any questions about this report, please contact me at (202) 512-7114 or 

dickenj@gao.gov. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. Major contributors to this 

report were Robert Copeland, Assistant Director; Kathryn Black; Laurie Pachter; and 

Rachel Svoboda.

Sincerely yours,

John E. Dicken

Director, Health Care

Enclosure
Enclosure

17 GAO-12-371R Savings from Generic Drug Use

Articles Identified through Literature Review

Through a structured literature review GAO identified 30 articles that included 

empirical analyses estimating the savings associated with generic drug use. To 

conduct this review, GAO searched reference databases using a combination of 

search terms,1

Table 2: Articles Identified through Literature Review by Study Type 

and supplemented this information by searching government 

websites, such as the Department of Health and Human Services’ website, and 

websites of national organizations, including those of trade groups, such as the 

Generic Pharmaceutical Association, and nonprofits, such as the Kaiser Family 

Foundation. Articles identified estimated the savings in reduced drug costs that have 

accrued from the use of generics, the potential to save more on drugs with greater 

generic use, and the effect of using generic versions of certain types of drugs on 

health care costs. Table 2 lists the 30 articles by study type.

Study type Study reviewed

Cost savings 

accrued 

Congressional Budget Office, Effects of Using Generic Drugs on Medicare’s 

Prescription Drug Spending: A CBO Study (Washington, D.C.: September 2010).a,b

Dobscha, S.K., L.M. Winterbottom, and L.S. Snodgrass, “Reducing Drug Costs at a 

Veterans Affairs Hospital by Increasing Market-share of Generic Fluoxetine,” 

Community Mental Health Journal, vol. 43, no.1 (February 2007), 75-84.a

Generic Pharmaceutical Association, Savings: An Economic Analysis of Generic Drug 

Usage in the U.S. (September 2011).a

Generic Pharmaceutical Association, Savings Achieved through the Use of Generic 

Pharmaceuticals, 2000-2009 (July 2010).a

Generic Pharmaceutical Association, Economic Analysis: Generic Pharmaceuticals 

1999-2008—$734 Billion in Health Care Savings (May 2009).a

Hong, S.H., and N.F. Canterbury, “Evaluation of the Cost-Saving Potential of a Generic 

Dispensing Incentive Program,” Drug Benefit Trends, vol. 16 (2004), 515-524.

Joyce, G.F., J.J. Escarce, M.D. Solomon, and D.P. Goldman, “Employer Drug Benefit 

Plans and Spending on Prescription Drugs,” Journal of the American Medical 

Association, vol. 288, no.14 (October 2002), 1733-1739.

Liberman, J.N., and M.C. Roebuck, “Prescription Drug Costs and the Generic 

Dispensing Ratio,” Journal of Managed Care Pharmacy, vol. 16, no. 7 (September 

2010), 502-506.

Scott, A.B., E.J. Culley, and J. O’Donnell, “Effects of a Physician Office Generic Drug 

Sampling System on Generic Dispensing Ratios and Drug Costs in a Large Managed 

Care Organization,” Journal of Managed Care Pharmacy, vol. 13, no. 5 (June 2007), 

412-419.a

Sy, F.Z., H.M. Choe, D.M. Kennedy, C.J. Standiford, D.M. Parsons, K.D. Bruhnsen, 

J.G. Stevenson, and S.J. Bernstein, “Moving from A to Z: Successful Implementation of 

a Statin Switch Program by a Large Physician Group,” American Journal of Managed 

Care, vol. 15, no. 4 (April 2009), 233-240.

 

1

We searched the reference databases for article titles, descriptors, and identifiers involving all of the 

following combinations: “generic drug,” “generic pharmaceutical,” “generic prescription,” “generic 

medication,” “generic counterpart,” “generic formulation,” “generic version,” “ multisource drug,” 

“multisource pharmaceutical,” “multisource prescription,” “multisource medication;” and “save,” 

“savings,” “spend,” “cost,” “expenditure,” “expense,” “outlay,” “economic,” “fiscal,” “financial,” 

“monetary.” We then searched article abstracts using these terms as well as the following modifying 

terms: “reduce,” “decrease,” “lessen,” “lower,” “minimize,” “curtail,” “moderate,” “increase,” “raise,” 

“rise,” “maximize,” “add,” “elevate,” “heighten,” “steady,” “level,” “plateau,” “decline,” “surge,” “swell,” 

“impact,” “effect,” “affect.” 
Enclosure

 18 GAO-12-371R Savings from Generic Drug Use

Study type Study reviewed

Potential cost 

savings

Bian, B., C.M.L. Kelton, J.J. Guo, and P.R. Wigle, “ACE Inhibitor and ARB Utilization 

and Expenditures in the Medicaid Fee-For-Service Program From 1991 to 2008,” 

Journal of Managed Care Pharmacy, vol. 16, no. 9 (November/December 2010), 

671-679.

Brill, A., “Overspending on Multi-Source Drugs in Medicaid,” American Enterprise 

Institute for Public Policy Research (March 2011).a

Congressional Budget Office, Effects of Using Generic Drugs on Medicare’s 

Prescription Drug Spending: A CBO Study (Washington, D.C.: September 2010).a,b

Cox, E., A. Behm, and D. Mager, 2005 Generic Drug Usage Report, a special report 

prepared at the request of Express Scripts (2005).a

Federal Trade Commission, Pay-for-Delay: How Drug Company Pay-Offs Cost 

Consumers Billions. An FTC Staff Study (Washington, D.C.: 2010).

Fischer, M.A., and J. Avorn, “Economic Consequences of Underuse of Generic Drugs: 

Evidence from Medicaid and Implications for Prescription Drug Benefit Plans,” Health 

Services Research, vol. 38, no. 4 (August 2003), 1051-1064.

Fischer, M.A., and J. Avorn, “Potential Savings from Increased Use of Generic Drugs in 

the Elderly: What the Experience of Medicaid and Other Insurance Programs Means for 

a Medicare Drug Benefit,” Pharmacoepidemiology and Drug Safety, vol. 13 (2004), 

207-214.

Haas, J.S., K.A. Phillips, E.P. Gerstenberger, and A.C. Seger, “Potential Savings from 

Substituting Generic Drugs for Brand-Name Drugs: Medical Expenditure Panel Survey, 

1997-2000,” Annals of Internal Medicine, vol. 142, no. 11 (June 2005), 891-897.a

Kesselheim, A.S., M.A. Fischer, and J. Avorn, “Extensions of Intellectual Property 

Rights and Delayed Adoption of Generic Drugs: Effects On Medicaid Spending,” Health 

Affairs, vol. 25, no.6 (November/December 2006), 1637-1647.a

Pharmaceutical Care Management Association, Undermining Generic Drug 

Substitution: The Cost of Generic Carve-Out Legislation (October 2008).

Shrank, W.H., N.K. Choudhry, J. Agnew-Blais, A.D. Federman, J.N. Liberman, J. Liu, A. 

S. Kesselheim, M.A. Brookhart, and M.A. Fischer, “State Generic Substitution Laws 

Can Lower Drug Outlays Under Medicaid,” Health Affairs, vol. 29, no. 7 (July 2010), 

1383-1390.a

Shrank, W.H., N.K. Choudhry, J.N. Liberman, and T.A. Brennan, “The Use of Generic 

Drugs in Prevention of Chronic Disease is Far More Cost-Effective Than Thought, and 

May Save Money,” Health Affairs, vol. 30, no. 7 (July 2011), 1351-1357.

Shrank, W.H., J.N. Liberman, M.A. Fischer, J. Avorn, E. Kilabuk, A. Chang, A.S. 

Kesselheim, T.A. Brennan, and N.K. Choudhry, “The Consequences of Requesting 

‘Dispense as Written’,” American Journal of Medicine, vol. 124, no. 4 (April 2011), 

309-317.

U.S. Department of Health and Human Services, Report on Prescription Drug 

Importation (Washington, D.C.: December 2004).

Effect on health 

care costs 

Billups, S.J., S.L. Plushner, K.L. Olson, T.J. Koehler, and J. Kerzee, “Clinical and 

Economic Outcomes of Conversion of Simvastatin to Lovastatin in a Group-Model 

Health Maintenance Organization,” Journal of Managed Care Pharmacy, vol.11, no. 8 

(October 2005), 681-686.

Helderman, J.H., N. Kang, A.P. Legorreta, and J.Y. Chen, “Healthcare Costs in Renal 

Transplant Recipients Using Branded versus Generic Ciclosporin,” Applied Health 

Economics and Health Policy, vol. 8, no. 1 (2010), 61-68.a

Katz, M., J. Scherger, S. Conard, L. Montejano, and S. Chang, “Healthcare Costs 

Associated with Switching from Brand to Generic Levothyroxine,” American Health and 

Drug Benefits, vol. 3, no. 2 (March/April 2010), 127-134.

LeLorier, J., M.S. Duh, P.E. Paradis, D. Latremouille-Viau, P. Lefebvre, R. Manjunath, 

and O. Sheehy, “Economic Impact of Generic Substitution of Lamotrigine: Projected 

Costs in the U.S. Using Findings in a Canadian Setting,” Current Medical Research and 

Opinion, vol. 24, no. 4 (2008),1069-1081.
Enclosure

 19 GAO-12-371R Savings from Generic Drug Use

Study type Study reviewed

Vlahiotis, A., S.T. Devine, J. Eichholz, and A. Kautzner, “Discontinuation Rates and 

Health Care Costs in Adult Patients Starting Generic versus Brand SSRI or SNRI 

Antidepressants in Commercial Health Plans,” Journal of Managed Care Pharmacy, 

vol. 17, no. 2 (March 2011), 123-132.a

Witt, D.M., D.J. Tillman, C.M. Evans, T.V. Plotkin, and M.A. Sadler, “Evaluation of the 

Clinical and Economic Impact of a Brand Name-to-Generic Warfarin Sodium 

Conversion Program,” Pharmacotherapy, vol. 23, no. 3 (2003), 360-368.a

Wu, E.Q., A.P. Yu, V. Lauzon, K. Ramakrishnan, M. Marynchenko, R. Ben-Hamadi, S. 

Blum, and M.H. Erder, “Economic Impact of Therapeutic Substitution of a Brand 

Selective Serotonin Reuptake Inhibitor with an Alternative Generic Selective Serotonin 

Reuptake Inhibitor in Patients with Major Depressive Disorder,” Annals of 

Pharmacotherapy, vol. 45 (April 2011), 441-451.

Source: GAO.

a

a

Article discussed in the report.

b

Article listed under cost savings accrued as well as potential cost savings.

(290984)
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