Drug Spending

Drug Spending Several Health Affairs papers have contributed greatly to informing policy discussions about prescription drugs. However, a paper by Cynthia Smith (Jan/Feb 04) contains an erroneous statistic related to generic drugs that bears correcting even at this late date. The author’s analysis of retail prescription drug spending in the National Health Accounts indicates that while generics accounted for 47 percent of prescriptions in 2001, their share of total prescription drug sales that year was only 18 percent. Yet the source document for these data indicates, "in fact, [in] 2001 generic drugs accounted for 47% of dispensed prescriptions, but only 8% of dollar sales." 1 Thus, generics represent only 8 percent of total prescription drug sales in 2001, not 18 percent. When linked to the percentage of dispensed prescriptions, the 8 percent figure is an important indicator of the relative affordability of generics. They represent about half of all prescriptions dispensed yet less than 10 percent of spending. Conversely, brand-name drugs account for almost half of all prescriptions filled but more than 90 percent of spending. Generics provide the same medicine and results at a much lower price—about 63 percent less per prescription, according to the National Association of Chain Drug Stores. 2 Kathleen D. Jaeger <h3>NOTES</h3> Centers for Medicare and Medicaid Services, Health Care Industry Market Update: Pharmaceuticals (Baltimore: CMS, 10 January 2003), 9. National Association of Chain Drug Stores, "Facts and Resources," www.nacds.org/wmspage.cfm?parm1=507 (click "Pharmaceutical Pricing") (9 November 2004).