print logo
RSS FEED

Please Actually Read My Research

Saturday, April 30, 2011

Galen Institute founder Grace-Marie Turner’s recent opinion piece on the Medicaid drug program is deeply misguided.

Galen Institute founder Grace-Marie Turner wrote a nationally syndicated opinion piece last week about research I recently published on excess spending in the Medicaid drug program. Her article indicates that my research supports saving money by pushing Medicaid patients onto older generic drugs instead of giving them newer, better drugs that are only available as costly brand name products. That sounds short-sighted and cruel on my part. Is it true?

Simply put, Turner’s story does not accurately represent my view. And an even more fundamental flaw in her piece is that while attacking my work she fails to discuss the actual topic of my research.

How could it be that Grace-Marie Turner came to write a story attacking my research for something it did not address, let alone advocate?

Turner’s article associates generics with old pharmaceuticals, and brand names with new drugs, instead of recognizing that my work only compares products that contain the same active ingredient. She points to Frank Lichtenberg, a noted and respected economics professor at Columbia Business School, who has done interesting but completely unrelated research on the positive effects of pharmaceutical innovation on overall healthcare costs and health outcomes. Turner seems to think that I am against this innovation. She also implies that Lichtenberg directly refuted my research by saying he “has documented the flaws in Brill’s silo approach to healthcare.” But in reality the Lichtenberg study she references was published in October 2008 while my paper was released last month, and it has nothing to do with the topic of my study. I would be surprised if Lichtenberg even knows who I am, and I am sorry that his reputation was used as a prop in this ham-fisted attack against my work.

Let me be clear about what my research does examine and conclude. But before proceeding, a bit of background on the subject is necessary. For the purposes of this research, consider that pharmaceutical products fall into two categories: First, there are brand products for which there are no generic alternatives (single-source products). These products tend to be the newest to market and, because they are (rightfully) protected from direct competition, the most expensive. In many instances they are superior to older products. Second, there are products for which both brands and generics are available (multi-source products). These products are generally older than the first group, as the brands’ monopoly protection has expired, but in general the brand version is priced higher than the generic version.

I study cost-efficiency in the Medicaid program related to the second type of product—brand and generic versions of the same drug. The sameness of brand and generic multi-source drugs is not my own subjective assessment; I rely on the Food and Drug Administration (FDA) to determine it. Furthermore, I carefully identify identical versions of the brand and generic products to ensure that the comparison is between products of identical strength, dosage form, and even package type and size. I say absolutely nothing about the first type of drug, single-source brand products for which there are no generic alternatives.

While attacking my work, Turner fails to discuss the actual topic of my research.

I look at data on 20 popular multi-source drugs—again, products for which there are both brand versions and generic versions available—dispensed by pharmacists to Medicaid patients in 2009. As I point out, most state Medicaid programs—not to mention private healthcare payers—already have policies in place intended to ensure that FDA-approved generics are substituted for their more expensive brand versions. My research simply assesses how successful state Medicaid programs are at this substitution and estimates the savings that could arise if Medicaid beneficiaries always use the lower-cost versions of the 20 drugs in the study.

By examining Centers for Medicare and Medicaid data for 45 states across four quarters, I found roughly 3.5 million instances where a Medicaid patient took a brand version of one of the 20 multi-source products. I estimate that if the lower-cost product had been used instead, the Medicaid program would have saved $329 million in 2009.

Given the severe budget pressures on state governments and the expected increased burden of expanding Medicaid as a result of ObamaCare, I believe it is prudent for states to undertake policies to more aggressively ensure that their Medicaid pharmacy programs operate as efficiently as possible.

My research estimates the savings that could arise if Medicaid beneficiaries always use the lower-cost versions of the 20 drugs in the study.

But, despite Turner’s claim, my research has nothing to do with switching drugs. It has nothing to do with newer products versus older products. It has nothing to do with medical innovation. I never advocate for a policy to “force patients to take medicines that may not be the right ones for their particular maladies,” and I never “recommend that state officials limit the prescription drugs available through Medicaid just to generic drugs.” How then could it be that Turner came to write a story attacking my research for something it did not address, let alone advocate?

Honestly, I have no idea.

I do know that Turner is not the only one who has flagged my study, as some brand drug companies have argued both that their version of a product is superior to any generic versions of a particular drug and that the waste in the Medicaid drug program is less than my estimate.

On the former complaint, the FDA disagrees. In fact, the definition of a generic drug is one that the FDA has determined to be bioequivalent to a brand. On the latter, reasonable people can quibble about the precise overspending estimate because the precise rebates brand drug companies pay to Medicaid programs are unknowable to the public and can only be estimated. But whether the waste was $329 million in 2009, as I report as my primary estimate, or closer to my two alternative estimates of $220 million or $392 million, it is clear that there is significant overspending in Medicaid that we should wring out of the system as best we can.

Turner appears to be fighting another fight. If she is truly concerned about patient outcomes and medical innovation, I am interested, and supportive. But instead it seems she has simply confused an issue that is not that complicated. That is a disservice to those who read her story, those interested in a more cost-effective Medicaid program, and those concerned with enhancing medical innovation for the public good.

Alex Brill is a research fellow at the American Enterprise Institute.

FURTHER READING: Brill has also written “Americans Are Good Economists” and “Hitting the Sick in the Wallet.” His research reveals “Overspending on Multi-Source Drugs in Medicaid,” “Saving on Multi-Source Drugs in Ohio's Medicaid Program,” and discusses “Peer-to-Peer Lending: Innovative Access to Credit and the Consequences of Dodd-Frank.”

Image by Darren Wamboldt/Bergman Group.

Most Viewed Articles

Why the Government Won't Let Colleges Reduce Tuition By Ike Brannon 09/17/2014
Congress should give permission for private colleges to cooperate in cutting their tuition. It’s ...
The U-9 and the Realm of the Unexpected By Ralph Kinney Bennett 09/19/2014
Exactly 100 years ago the world was reminded yet again that war — declared or undeclared — is in ...
Closing the Racial Gap in Education By Jason L. Riley 09/10/2014
The usual explanation for the academic achievement gap is that blacks come from a lower ...
Telecommuting: Good for Workers, Good for Bosses By Michael M. Rosen 09/12/2014
Challenges abound, but the trajectory is plain.
The Minimum Wage Can Never Be High Enough By Ike Brannon 09/07/2014
The minimum wage is a facile non-solution for the complicated problem of poverty in America.
 
AEI