Prescribing Differences: Medicare Can Learn From the VA
Gellad WF, Donohue JM, Zhao X, et al
Ann Intern Med. 2013;159:105-114
This retrospective cohort study of 1,061,095 Medicare Part D beneficiaries and 510,485 veterans aged 65 years or older with diabetes in 2008 compared the percentage of patients in each system taking analogue vs nonanalogue long-acting insulins and brand-name vs generic oral hypoglycemics, statins, and angiotensin-converting enzyme (ACE) inhibitors or angiotensin-receptor blockers (ARBs). The populations were matched to make the comparisons equivalent. The authors then quantified the effect of differences in brand-name drug use on drug spending by comparing actual spending with estimated spending if Medicare and the US Department of Veterans Affairs (VA) were to adopt each other's rate of brand or analogue use. In an important subanalysis, they examined the subgroup of prescriptions that were available in both brand-name and generic forms and drugs that had no direct generic substitute but had generic alternatives within the same therapeutic class.
Brand-name drug use in Medicare was 2-3 times higher than in the VA. Findings were driven by the VA's greater propensity to substitute within the drug class when no direct generic equivalent was available. When direct generic equivalents were available, generic use was similar. Had Medicare used generics at the same rate as the VA, spending would have been $1.4 billion less for that population.
Healthcare spending in the United States is substantially greater than in other industrialized nations. Although pharmaceutical costs are only a portion of the total, they represent the second largest cost component after hospital inpatient care, accounting for approximately 20% of all direct medical costs for people with diabetes. Pharmaceutical costs for patients with diabetes are more than double the costs for people without diabetes.
No one would deny that we need to find ways to rein in costs, but there is considerable debate about how to do so without sacrificing quality of care or consumer choice. The current article is an example of unnecessary spending and implicitly suggests an approach that could achieve cost reduction with little sacrifice. Brand-name drugs are especially expensive in the United States, with prices a third to 2 times higher than in other countries, whereas generic prices are lower.
As the present study suggests, merely switching from branded to generic products could have an enormous cost impact. The authors noted, however, that the cost savings described were largely driven by within-class rather than within-drug substitutions. When a generic version of the branded drug was available, both systems used generics equally. The big savings for the VA was due to the substitution of a generic drug for a similar but not exact branded drug (eg, generic simvastatin instead of brand atorvastatin).
Allowing for personal preferences, which are more difficult to override in a tightly controlled system like the VA, the actual savings in a less controlled system would likely be lower than reported here. Nevertheless, the substantial difference in costs between the 2 systems suggests that there is ample room for savings by merely being more cognizant of the price of the drugs being prescribed and selecting a lower-cost but therapeutically equivalent option.
Abstract
Brand-Name Prescription Drug Use Among Veterans Affairs and Medicare Part D Patients With Diabetes: A National Cohort Comparison
Gellad WF, Donohue JM, Zhao X, et al
Ann Intern Med. 2013;159:105-114
Study Summary
This retrospective cohort study of 1,061,095 Medicare Part D beneficiaries and 510,485 veterans aged 65 years or older with diabetes in 2008 compared the percentage of patients in each system taking analogue vs nonanalogue long-acting insulins and brand-name vs generic oral hypoglycemics, statins, and angiotensin-converting enzyme (ACE) inhibitors or angiotensin-receptor blockers (ARBs). The populations were matched to make the comparisons equivalent. The authors then quantified the effect of differences in brand-name drug use on drug spending by comparing actual spending with estimated spending if Medicare and the US Department of Veterans Affairs (VA) were to adopt each other's rate of brand or analogue use. In an important subanalysis, they examined the subgroup of prescriptions that were available in both brand-name and generic forms and drugs that had no direct generic substitute but had generic alternatives within the same therapeutic class.
Brand-name drug use in Medicare was 2-3 times higher than in the VA. Findings were driven by the VA's greater propensity to substitute within the drug class when no direct generic equivalent was available. When direct generic equivalents were available, generic use was similar. Had Medicare used generics at the same rate as the VA, spending would have been $1.4 billion less for that population.
Viewpoint
Healthcare spending in the United States is substantially greater than in other industrialized nations. Although pharmaceutical costs are only a portion of the total, they represent the second largest cost component after hospital inpatient care, accounting for approximately 20% of all direct medical costs for people with diabetes. Pharmaceutical costs for patients with diabetes are more than double the costs for people without diabetes.
No one would deny that we need to find ways to rein in costs, but there is considerable debate about how to do so without sacrificing quality of care or consumer choice. The current article is an example of unnecessary spending and implicitly suggests an approach that could achieve cost reduction with little sacrifice. Brand-name drugs are especially expensive in the United States, with prices a third to 2 times higher than in other countries, whereas generic prices are lower.
As the present study suggests, merely switching from branded to generic products could have an enormous cost impact. The authors noted, however, that the cost savings described were largely driven by within-class rather than within-drug substitutions. When a generic version of the branded drug was available, both systems used generics equally. The big savings for the VA was due to the substitution of a generic drug for a similar but not exact branded drug (eg, generic simvastatin instead of brand atorvastatin).
Allowing for personal preferences, which are more difficult to override in a tightly controlled system like the VA, the actual savings in a less controlled system would likely be lower than reported here. Nevertheless, the substantial difference in costs between the 2 systems suggests that there is ample room for savings by merely being more cognizant of the price of the drugs being prescribed and selecting a lower-cost but therapeutically equivalent option.
Abstract
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