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GPhA Calls Generic Supplemental Rebates 'Counterproductive,' Urges CMS to Clarify Position

ARLINGTON, Va., Sept. 9, 2004 -- The Generic Pharmaceutical Association (GPhA) today praised the Centers for Medicare and Medicaid Services (CMS) for its strong recommendation that states encourage generic pharmaceutical substitution as a way to reduce health care costs. CMS made the recommendation in a paper it issued today outlining "best practices" that states can use to save money on prescription drugs in Medicaid programs.

"CMS' message to the state Medicaid programs is clear: the more you use generic drugs, the more taxpayer dollars states will save. Strong generic drug substitution is a powerful weapon in the fight against high prescription drug costs for all Americans," said Kathleen Jaeger, President and CEO of GPhA. Generic pharmaceuticals provide the same medicine and the same results as their brand name counterparts but cost up to 80% less. In states such as Idaho -- which has increased the use of generics over costlier name brand drugs -- consumers have saved $11.7 million. Similarly, Minnesota will save up to $10 million annually by requiring a generic drug to be dispensed unless otherwise authorized. "Increasing utilization of generic drugs through substitution can provide significant savings for consumers, state and federal governments and insurers," said Jaeger.

Jaeger raised concerns about the interpretation of the CMS paper as regards to generic supplemental rebates, which often drive up costs for states and decrease access to generic pharmaceuticals. "Supplemental rebates on generic drugs are not the answer to increasing Medicaid costs and could push generic drugs out of the program, increasing drug costs for beneficiaries," said Jaeger. The GPhA President called upon CMS to clarity its position.

Unlike their brand industry counterparts, generic manufacturers face robust price competition and operate on significantly less profit margins. In states that have attempted to extract rebates higher than the national Medicaid standard of 11 percent for generics, some generic manufacturers have determined that they could not afford to participate in the state programs. In Missouri and New Jersey, state officials also found that supplemental rebates which were intended to produce revenue for the state actually yielded significant increases in state expenditures as a result of reduced access to affordable generic pharmaceuticals. In fact, Missouri's SeniorRx Program estimated that increasing generic rebates would have increased state costs by $8.5 million in the first year alone.

GPhA also urged CMS to encourage State Medicaid Directors to eliminate mental health "carve-outs" in their programs. These "carve-outs" effectively override generic substitution laws based on the erroneous assumption that chemically equivalent generic drugs undermine treatment outcomes of patients with mental illness. "There is no scientific or medical basis for this policy nor is it consistent with FDA's determination of therapeutic equivalence. Simply stated, the 'carve-out' policy increases state and federal Medicaid program costs by millions of dollars without any credible, independent evidence-based studies of better outcomes," Jaeger said.

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic drug industry. Generics represent 51% of the total prescriptions dispensed in the United States, but less than 8% of all dollars spent on prescription drugs. The Generic Pharmaceutical Association is committed to improving lives for less.

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