Do generics cost more in long run?

Big Pharma has found an anti-generics ally in the New York Post. The newspaper is reviling New York Gov. Eliot Spitzer's plans to cut prescription drug spending by $172 million, saying that spending more on drugs actually saves money in the long run.

The paper cites a study by the National Bureau of Economic Research that showed every dollar Medicare spends on drugs saves $2.06, because the meds "often obviate" expensive surgeries. And here's the kicker: Another NBER study estimated that "switching from older, cheaper medicines to newer, more expensive ones reduced non-drug healthcare expenses 7.2 times as much as it raised drug spending."

Now, that's completely counter to the conventional wisdom that generics are reasonable and cheap alternatives to new branded meds. Of course, sometimes branded drugs use new-and-different technologies that are more effective for patients. But that's not a universal occurrence, and it's become the norm for governments and insurers to pressure docs and patients toward copycat drugs.

So we thought we'd check out the NBER's research in this area. Here are the numbers: If 1,000 old scrips were replaced with new ones, drug costs would grow by $18,000, but hospital spending would decline by $44,469. The catch is that the paper deals with 10-year-old meds. But check out the paper at the link below and let us know if you agree.

- read the column in the New York Post
- see one of the NBER's studies