AARP JANUARY 2023 PUBLIC POLICY INSTITUTE Fact Sheet Medication Literacy Series: Generic Drugs James McSpadden AARP Public Policy Institute Generic drugs, which are lower-cost versions of brand- name drugs that enter the market after a brand-name drug's monopoly period ends, have become a common fixture in US health care. Over the past three decades, the US Food and Drug Administration (FDA) has increased generic drug approvals, and clinicians have increasingly prescribed these therapeutically equivalent versions of brand-name drugs. As such, generics have come to assume a larger portion of the drug market. In 1994, generic drugs accounted for just 34 percent of all prescriptions filled in the US.' Today, 90 percent of all prescriptions are for generic drugs.' Many adults ages 50 and older depend on generic drugs to maintain their health. Yet some older adults still have a limited understanding of generic drugs. Older adults may perceive generic drugs as inferior to brand-name equivalents, question the safety and efficacy of generics, or simply be unaware of the availability or financial benefit of generics.? As a result, some older adults may underutilize or choose not to utilize generic drugs. This Fact Sheet explores the value of generic drugs to older adults and several of the potential barriers they can face when accessing generic drugs. Value of Generic Drugs Prescription drug use among older adults is high. Today, three- quarters of older adults take at least two medications daily,* more than 40 percent take 5 or more, and nearly 20 percent take 10 or more drugs.® An average Medicare beneficiary takes 4.6 prescriptions per month.® Many of these prescription drugs are generic drugs. Indeed, generic drugs have assumed a larger share of the drugs that older adults depend on to maintain their health. The generic utilization rate (the percentage of all dispensed drugs that were generics) in Medicare Part D increased from 72 percent to Key Takeaways Nine of 10 prescriptions filled in the United States are for generic drugs. With an overwhelming share of the prescription drug market, generic drugs have generated billions of dollars in annual savings for consumers and the US health care system. However, some adults ages 50 and older still do not use generic drugs when they are available. Improving patient awareness and understanding of the value of generic drugs could lead to substantial savings. 90 percent between 2009 and 2018. Over the same period, the rate in Medicaid increased from 70 percent to 87 percent.' The high utilization of lower-priced generic drugs among older adults has resulted in significant savings to the health system. In 2020, the generic drug industry estimated the annual savings to the health system at $338 billion, with $110 billion attributable to Medicare alone.® The same estimates highlighted $120 billion in savings from generic drugs taken by adults ages 65 and older and $147 billion in savings among adults ages 40 to 64. Not all older adults, however, are seeing generic drug-related savings. Some older adults continue to take brand-name drugs when generics are available, due to a variety of reasons.° An estimate of Medicare Part D utilization in 2016 showed that beneficiaries could have saved over $600 million in out- of-pocket costs if they had taken a generic rather than the brand."° Some older adults miss out on savings when they are forced to pay relatively high copays or coinsurance for a generic drug because of the placement of the drug on an insurance plan's formulary." And some older adults miss out completely on generic drug savings if they take prescription drugs that do not have generic equivalents. Regardless, many older adults stand to benefit from generic drug-related savings, once barriers to underutilization are addressed. Barriers to Understanding and Using Generic Drugs Generic Substitution All generic drugs reach consumers through substitution, with a provider choosing the generic drug over the brand-name drug. Whether a provider writes a prescription for a generic drug or a pharmacist substitutes a generic before dispensing it to the consumer, a provider is effectively replacing a brand-name drug with its generic equivalent. JANUARY 2023 Drug Types Generic: Therapeutically equivalent to a brand-name drug in dosage, safety, strength, quality, efficiency, administration, and intended use. Brand: Unique, first-in-class drug marketed under a trademark-protected name. However, many consumers do not discuss generic substitution with their prescribing provider, and the situation has not improved much over the past two decades. In a 2007 survey of commercially insured beneficiaries, only one-third of adults reported asking their provider about substitution most of the time." In a 2016 survey of adults with chronic conditions, still fewer than half (46 percent) of the respondents discussed the substitution of a generic drug for a brand." This apparent lack of awareness is surprising given that many state laws require patients to be notified of a generic substitution. Twenty- nine states and the District of Columbia require that pharmacists notify a consumer prior to substituting a generic, and 40 states and the District of Columbia require that pharmacists notify a consumer substituting a biosimilar drug." Recognizing a Generic Drug's Name Another potential challenge is patients' ability to identify their drugs by name. Studies show that identification of a drug by name, whether in combination with other identifiers (e.g., pill color, size, or shape) or not, is connected to higher drug adherence and greater health outcomes." Yet identification of a drug by name may be challenging for some older adults. One study of older adults showed that more than 80 percent of participants were unable to identify all their medications by name. JANUARY 2023 Part of the challenge for generic drugs may be the generic drug's name. Manufacturers develop generic drug names by following a specific naming convention (see sidebar). According to the US Naming Council, which approves all generic drug names, the naming system prioritizes patient safety by establishing clearly distinctive names for providers." Yet to consumers the approved names may seem strange, and the unfamiliar names may be hard to read, confusing, and/or difficult to remember. Generic Medication Labels Vary State regulations on what drug name or names must appear on a label, as well as how the name(s) should appear, may add to further consumer misunderstanding of generic drugs."® Forty states require pharmacists to list both generic and brand names on a prescription drug container label when substitution occurs. Among these, a few states require specific language for the label €.g., [generic drug name] as a substitute for [brand drug name]). Additionally, 15 states require labels to include the generic drug manufacturer when a substitution occurs. The lack of standards to support a given format could make it more difficult for individuals to navigate a label and to isolate the name of the generic drug. Limited Medication Literacy Millions of older adults-over half (59 percent) of adults ages 65 and older and one-third (34 percent) of adults ages 50 to 64-have inadequate or limited levels of medication literacy, which is the ability to obtain information about medication, process it, and use the information to make medication decisions." Older adults with limited literacy lack certain skills that enable medication decision making, such as recognizing and understanding certain medication vocabulary and communicating with their provider about drug use. These limitations can compound the challenges older adults face when understanding and using generic drugs. For example, in a study that examined drug identification and limited literacy, only Generic Drug Naming Convention Generic drug name = prefix + infix (optional) + stem Prefix: distinguishes the drug from others in the class Infix: provides further classification, if necessary Stem: designates the class of drug Example: Prefix Infix Stem atorvastatin Manufacturer = Inhibitorof. - Enzyme inhibitors created HMG-CoA enzyme 38 percent of older adults with limited literacy could identify their hypertension medication by name.?° Biosimilars Another potential barrier to understanding and using generics is the rise of biosimilar drugs. Biosimilars are generic versions of biologic drugs-drugs made from living organisms used to treat conditions such as cancer, multiple sclerosis, and rheumatoid arthritis-that have no clinically meaningful differences from their brand-name counterparts. Biosimilars currently represent a 30 percent discount on biologics, many of which have annual prices that exceed $30,000 per year and have the potential to greatly reduce health system and consumer spending." The FDA gained the authority to approve biosimilars in 2010. Since that time, the number of biosimilars has increased. Twenty- two biosimilars have come onto the US drug market, and this number is expected to grow substantially as more brand-name biologic patents expire." Consumer awareness of biosimilars has evolved slowly. A 2014 survey showed low general awareness of biosimilars."? Only one- quarter (25 percent) of adults diagnosed with a condition often treated by biologic drugs were JANUARY 2023 aware of biosimilars. Among undiagnosed adults, awareness was even lower (16 percent). A 2020 survey of biosimilar perceptions showed incremental movement in awareness, with 39 percent of providers reporting that some or all of their patients were aware that biosimilars existed.** At the same time, 40 percent of providers acknowledged that they rarely or never talk with their patients about biosimilars, despite those patients already taking one or more biologic drugs. Conclusion Generic drugs have clear value to older adults. Clinically, generic drugs, which are FDA- approved and determined to be therapeutically equivalent, provide additional safe and effective treatment options. Financially, generic drugs offer direct savings through lower out-of-pocket costs and indirect savings through lower premiums or taxes when they lower costs to the entire health care system. Realizing these benefits for older adults, particularly those with limited medication literacy, may take additional effort. Eliminating the barriers to generic drugs by building consumer understanding can lead to even higher generic drug utilization and can help older adults save money while maintaining their health. This can be achieved through improving policies and practices that help older adults recognize the value of generics and biosimilars, communicate with providers about the possibility of generic and biosimilar substitutions, and identify by name the generic drugs in their medication regimens. 1 Steve Mass, "Competition in Generic Drug Markets," National Bureau of Economic Research Digest, no. 11 (November 2017), h ://www.nber.org/di nov17, ition-generic-dr -mark 2 IQVIA Institute, The Use of Medicines in the U.S. 2022: Usage and Spending Trends and Outlook to 2026, April 2022, https://www.iqvia. com/insights/the-iqvia-institute/reports/the-use-of-medicines-in-the-us-2022. 3 Yvette C. Terrie, "Dispelling Generic Drug Myths and Misconceptions," US Pharmacist 47, no. 6 (2022): 33-36, https://www. uspharmacist.com/article/dispelling-generic-drug-myths-and-misconceptions. 4 Antoinette B. Coe et al., "Predictors of Receipt of Comprehensive Medication Reviews in Older Adults," The Journals of Gerontology: Series A, glac096 (2022), https://doi.org/10.1093/gerona/glac096. Lown Institute, Medication Overload: America's Other Drug Problem, April 1, 2019, https://lowninstitute.org/reports/medication- ver! -ameri her-drug-pri m/. MedPAC, A Data Book: Health Care Spending and the Medicare Program, July 2021, https://www.medpac.gov/wp-content/uploads/ impor r fi fault-sour -book/july2021_m k f. Congressional Budget Office, Prescription Drugs: Spending, Use, and Prices, January 2022, https://www.cbo.gov/publication/57772. Association for Accessible Medicines, The U.S. Generic & Biosimilar Medicines Savings Report, October 2021, https://accessiblemeds, org/sites/default/files/2021-10/AAM-2021-US-Generic-Biosimilar-Medicines-Savings-Report-web.pdf. Mariana P. Socal, Ge Bai, and Gerard F. Anderson, "Factors Associated with Prescriptions for Branded Medications in the Medicare Part D Program," JAMA Network Open 4, no. 3 (2021): e210483, https://doi.org/10.1001/jamanetworkopen.2021.0483., 10 US Department of Health and Human Services, Savings Available Under Full Generic Substitution of Multiple Source Brand Drugs in Medicare Part D, July 23, 2018, https://aspe.hhs.gov/sites/default/files/private/pdf/259326/DP-Multisource-Brands-i 11 Elizabeth Carter and Chris Sloan, "Seniors Pay More for Medicare Pa rt D Generics cs Despite Stable Prices," Avalere, May 2 22, 2018, JANUARY 2023 12 William H. Shrank et al., "Patients' Perceptions of Generic Medications," Health Affairs 28, no. 2 (2009): 546-56, https://doi. org/10.1377/hlthaff.28,2,546. 13 Aaron S. Kesselheim et al., "Variations in Patients' Perceptions and Use of Generic Drugs: Results of a National Survey," Journal of General Internal Medicine 31 (2016): 609-14, https://doi.org/10.1007/s11606-016-3612-7. 14 Leigh Purvis and James McSpadden, State Biosimilar Substitution Laws Could Reduce Consumer Access and Savings (Washington, DC: AARP Public Policy Institute, October 2022), : consumer-access.html. Notably, some research has shown that consumer notification may have a negative effect on generic substitution. See Benjamin N. Rome, Ameet Sarpatwari, and Aaron S. Kesselheim, "State Laws and Generic Substitution in the Year after New Generic Competition," Value Health S1098-3015, no. 22 (2022): 1736-42, https://doi.org/10.1016/j,jval.2022.03.012. 15 Jennifer L. Lenahan et al., "A Drug by Any Other Name: Patients' Ability to Identify Medication Regimens and Its Association with Adherence and Health Outcomes," Journal of Health Communication 18, supp. 1 (2013): 31-39, https://doi. org/10.1080/10810730.2013.825671. 16 Sunil Kripalani et al., "Predictors of Medication Self-management Skill in a Low-literacy Population," Journal of General Internal Medicine 21, no. 8 (2006): 852-56, https://www.ncbi.nlm.nih.gov/pmc/arti PMC1831567/, 17 "United States Adopted Names Naming Guidelines," AMA, accessed October 27, 2022, https://www.ama-assn.org/about/united- states-adopted-names/united-states-adopted-names-naming-guidelines. 18 James McSpadden, Medication Literacy Series: Prescription orug Labels (Washington, Dc: AARP Public Policy Institute, November 19 Mark Kutner et al., The Health Literacy of America's Adults: Results from the 2003 National Assessment of Adult Literacy, NCES 2006- 483 (Washington, DC: National Center for Education Statistics, September 2006), https://nces.ed.gov/pubs2006/2006483.pdf. 20 Jennifer L. Lenahan, "A Drug by Any Other Name." 21 Victor L. Van de Wiele et al., "The Characteristics of Patents Impacting Availability of Biosimilars," Nature Biotechnology 40 (2022): 22-25,h //www, nature m/arti 41587-021-01170-5. 22 IQVIA Institute, Biosimilars i in the United States 2020-2024: Competition, Savings, and Sustainability, September 29, 2020, 23 Ira Jacobs et al., Patient Attitudes and Understanding about Biosimilars: An International Cross-sectional Survey," Patient Preference and Adherence 10 (2016): 937-48, https://doi.org/10.2147/PPA.S104891. 24 Shelby Wilde et al., Understanding Stakeholder Perception of Biosimilars (Chicago, IL: NORC, April 2021), https://www.norc.org/ PDFs/Biosimilars/20210405 AV%20-%20NORC%20Biosimilars%20Final%20Report.pdf. Fact Sheet 1559000, January 2023 © AARP PUBLIC POLICY INSTITUTE 601 E Street, NW Washington DC 20049 Follow us on Twitter @AARPpolicy on facebook.com/AARPpolicy www.aarp.org/ppi For more reports from the Public Policy Institute, visit http://www.aarp.org/ppi/. https://doi.org/10.2641 i,.00182,001 ~AARP