Extensions of Intellectual Property Rights and Delayed Adoption of Generic Drugs : Effects on Medicaid Expenditures

Rising prescription drug costs present a critical policy issue for Medicaid. Generic substitution can reduce costs, but the effects are undercut by extensions of intellectual property protection, elevated generic prices, and low substitution rates. Using Medicaid prescription data for amoxicillin/clavulanate, metformin, and omeprazole, we calculated the savings that could have been realized if generic drugs had been available and fully substituted at their lowest cost when intellectual property protection first expired (an average delay of 26 months). The delay in availability, elevated prices, and slow uptake of generic alternatives cost Medicaid $1.5 billion in 2000-2004 for these three drugs alone