• Saving costs – low hanging fruit

    Austin peaked my interest with his post on Deloitte’s analysis, The Hidden Costs of U.S. Health Care for Consumers. So I went and read it. Towards the end, there was one page that really jumped out at me.

    A survey of 1,008 U.S. adults asked people, “Would you consider doing any of the following if it would save money for health care?” Here’s what they said:

    Health Savings Accounts, in the middle there, get a lot of press.  So does destination medicine, down there at the bottom. Do you know what gets relatively little attention? Using generic drugs. I hear from lots of physicians who say that patients demand name brand drugs, but those are anecdotal reports. This tells a different story.

    Look at that chart again. 80% of people say they would use generics to save money! Not only that, but look at this, which I made from the accompanying Deloitte table:

    Are there any groups at all that don’t overwhelmingly support the use of generic drugs to save money?

    With this kind of support, I don’t know why we aren’t trying harder to push for formulary reform in Medicare and Medicaid. I also don’t know why private insurance companies aren’t doing the same. This would actually, not just theoretically, save money; it would also do so immediately.

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    • Interesting bit on that last chart where generic Rx preferences appears to rise with income. If the difference is significant, I wonder if it reflects the effect of richer subsidies.

      • I suspect that the increased interest in generics as income rises is most likely due to increased access to, and ability to interpret, good information. The competition between generics and proprietary drugs depends, in many cases, partly on the vendors of proprietary drugs confusing the public and even doctors regarding the relative efficacy of the products. Without that confusion, the question sometimes is simply “would you rather spend $25 a year or $2500 a year to manage your condition?” Since education and access to better information are often closely associated with greater income, people in higher income brackets may be more likely to see this question for what it is, rather than be confused by ads, PR, and other poor sources of information.

        Insurers and other sources have done quite a good job of getting information about generics into the public eye. Unfortunately, other issues in relative efficacy and costs are much more difficult to understand and accept and much less well publicized than the trade-offs in generic drugs. Well educated people and even many doctors are much more likely to be confused about issues like the relative value of coronary artery stenting or coronary artery bypass in various settings, the considerations of timing of joint replacement, the value of various high tech imaging procedures in different settings, and so on. This operates to the detriment of US health care, adversely effecting both costs and outcomes.

        • Pat, I see your point, though I think it’s hard to tell from the data. The same effect is visible for education, to the left of it.

          I occasionally see what you commented on, namely that higher income (read: better educated) means higher comfort with ambiguity and more willingness and time to source out information. On the other hand, with higher education and income I also see more of the irrational “I only want the best” mentality, which contributes to a lot of excess consumption.

          • I think that the higher income/education support for generics may be the reliance of people with less access to information on brand names as a proxy for real information on quality and effectiveness. It’s also a tempting rare opportunity to get the high-priced brand. Still, it’s large majority that would take the generic.

            The generic label is off-putting, too, in a culture as brand-conscious as we are.

    • How low hanging is the fruit? I thought about 75% of all prescriptions were already for generics?

      http://www.npr.org/blogs/health/2011/04/22/135538006/3-in-4-prescriptions-are-now-for-generic-drugs

    • For those unfamiliar with his work, Aaron wrote about drug costs last year.

      http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-drugs/

      Even though we use 10% fewer drugs than other comparable OECD countries, we spend much more on our drugs. We already use a lot of generics, but there is room for more and the possibility of a more restricted VA type formulary is another alternative.

      Steve