Testimony Before the U.S. Senate Honorable Gaylord Nelson, Chairman David A. Danielson Staff: Massachusetts Drug Formulary Department of Public Welfare Boston, Massachusetts 02111 INTRODUCTION Mr. Chairman, Ladies and Gentlemen: I am David A. Danielson from Boston, an Associate Director in the Medical Assistance Division, Massachusetts Department of Public Welfare. My duties include serving as a staff member with the Massachusetts Drug Formulary Commission working with the Department of Public Health. This area I and my colleagues from California, Illinois and New York hope to focus attention on the need for prompt action to clarify issues of generic drug equivalency. can have a significant impact on both consumers and state Medicaid budgets. Before reading my formal statement I wish to commend Mr. Bill Haddad and Mr. David Langdon for their diligent work in preparing the "green book", the New York State list of safe, effective and therapeutically equivalent drugs. Mr. Haddad has long been a courageous champion of the rights of the many against the privileges of the few. To a journalist's ability to clarify the complex issue are added in Mr. Haddad the virtues of persistance and conviction. We owe him and his staff a debt of gratitude. One frequently made and widely believed allegation is that generic drugs do not save money. I believe the facts refute this argument. A review of 5 million Medicaid pre scriptions written in Massachusetts during 1976 shows that millions of dollars can be saved. Caseloads were not constant through the year but I estimate that these data refer to a patient population of approximately 640,000 individuals. Data on drug costs can be obtained from Medicaid sources in the many states with drug benefits. We have a computerized payment system for prescription drugs dispensed for ambulatory patients and the major portion of drug bills for people in long term care institutions. The payments we made in 1976, excluding, I emphasize, hospital pharmacy, were thirty-two million dollars, or about $50 for each person in the Medical Assistance program. Of the top 50 drugs billed to Medicaid by dollar volume, 17 or 34%, are available from multiple sources. Table I (Data supplied at time of presentation) lists those drugs for which substitution is possible, the actual costs to Medicaid for filling brand and generic prescriptions of these drugs, and the percentage difference in equivalent expenditures. The final column lists the savings that would have been achieved had all prescriptions been filled generically in 1976 as actual market costs. These predicted savings would be greater if the industry's Red Book were used to compare actual ingredient costs. The importance of this information is that it is a bottom line figure, based on actual state expenditures. It represents the total distributing expense, including a dispensing fee of $2.10 per prescription for the pharmacist. Another approach we have used is sampling the comparative costs of 25 typical generically available products. These figures, again based upon actual Medicaid disbursements to Massachusetts pharmacists in 1976, produced estimated minimum savings, given an adequate formulary of interchangeable products, of $2.5 million, or 9% of the Medicaid drug expenditures. Greater savings could be achieved if maximum allowable costs were established that are lower than the current market average for generic prescriptions. this study (Table II) will be distributed at the hearing). (The summary of Using a different methodology, prescription tracing in drug stores, Dr. Theodore Goldberg and his colleagues at Wayne State University School of Medicine in Detroit, Michigan, recently reported that a scant $247,000 in "savings" was achieved in Michigan during the first year of Drug Product Selection Legislation. Compare this, if you will, with the potential savings of $18,440,000 on the estimated 30 million new prescriptions in that state which he estimated could have been achieved if physicians had prescribed generic fifty percent of the time. His figures are also based upon actual observed differences in cost to the consumer with generic substitution. This study, supported by the National Center for Health Ser vices Research found over a three year period that 51% of all prescriptions in Wisconsin and Michigan were written for multisource drugs. I hope the point is made that the financial issue for consumers especially the elderly and chronically ill - and for state Medicaid payments is of significant importance. If such savings are possible why are they not being realized? Can such factors as brand loyalty, prescriber's resistance to change, and the conventional wisdom that "you only get what you pay for" explain the Michigan figures? Are the charms of the drug detailing teams that seductive? I contend that they are not, that the Food and Drug Administration has supplied a tenuous but still official basis for doubting the safety of generic prescribing through publication of its Blue Book. New York State has performed a considerable service by extracting from FDA files the names and manufacturers of 244 FDA approved multisource drug products which can be safely interchanged. These will form the basis for a Massachusetts Formulary of Interchangeable Drug Products, that will be issued in January. However, approximately 84 multisource drug products for which patent protection has lapsed are still under a cloud of suspicion since they are included in the Blue Book. These drug products account for roughly one-fifth of our national expenditures for interchangeable drugs and for most of the physician confusion about the safety of drug inter change. In a letter to David Langdon, Assistant Director, New York State Assembly Office of Legislative Oversight and Analysis, dated May 23, 1977, Gene Knapp, Associate Director for Drug Monographs FDA, stated that the FDA was making a further refinement of drugs on the To date, no such refined list has been forthcoming. This inaction has caused particular problems in Massachusetts, since our drug formulary law, Chapter 470, Laws of 1976, prohibits inclusion in the formulary of "those drug products for which bioequivalence is considered essential, but for which bioequivalence has not been established by the Food and Drug Administration." We realize that the Blue Book does not contain a list of drug products for which bioequivalence is considered essential and not yet established. Indeed, the FDA Commissioner stated in the Federal Register, Vol. 42, No. 5 (January 7, 1977) that "as evidence of bioequivalence is closely examined, few of the drug products listed will be determined to have well-documented, medically significant bioequivalence problems." Clearly, this comment indicates that most of the drugs on the list are those for which bioequivalence is not a problem. Furthermore, nowhere have we seen a satisfactory explanation for the basis of inclusion of the current drugs on the list. The language in the Federal Register, Vol 42, No. 5, p. 1626, certainly does not clarify the issue. ".....a drug product was included on the list if, in What constitutes "suspicion"? Upon what evidence was this suspicion based? We recognize the difficulty that faces a new Commissioner in a new administration when setting departmental priorities. We must insist, however, that the Food and Drug Administration discharge promptly its responsibility under the law to inform the people of the basic facts about drug efficacy and safety and that Congress provide funds and staff to discharge those responsibilities conscientiously. Old policies, based on officially sanctioned innuendo, support artificially inflated drug prices. They must be openly discredited. We urge the FDA-to review as quickly as possible, the Blue Book multisource drugs and remove those for which bioequivalence is not a problem. This is an instance of clear savings in the cost of medical care with no significant reduction in quality of care, |