Date of Award

4-2014

Degree Name

Doctor of Philosophy

Department

Public Affairs and Administration

First Advisor

Dr. Matthew S. Mingus

Second Advisor

Dr. Barnard T. Han

Third Advisor

Dr. Sharie L. Falan

Abstract

Increasing health care costs have made management of Medicaid services to provide low-income families through Medicaid programs critical in the recent times. The number of Medicaid beneficiaries in Michigan has increased over the years mainly due to the downsizing of auto sectors. Currently, states spend almost 16% of their budget for Medicaid, making it the second largest item in the budget for most (Kaiser Foundation, 2010). Prescription drugs are a significant part of Michigan’s Medicaid costs. Higher costs caused a tremendous fiscal burden on Michigan in administering the program and providing prescription drugs for its patients. Michigan has implemented several strategies for Medicaid since 2001, which have brought modest results in terms of Medicaid cost containment. An AARP report (2010) found that 80% of drugs have therapeutic equivalents or generics available in the market while 20% of drugs have no generic substitutions. But depending on the nature of diseases generic substitutions for Medicaid prescription drugs could be much higher than 80%. Previous research suggests that Michigan has the potential to increase generic substitutions at least 10% to 15%. This study examined whether a generic substitution policy would be an efficient and effective cost-containment strategy for Michigan Medicaid prescription drug programs. This research emphasized three questions: First, would a generic substitution policy be an efficient strategy in containing Medicaid prescription drug program costs for Michigan? Second, did any “heavily used” brand drugs exist which had generic equivalents allowing Michigan to safely reduce Medicaid prescription drug costs by implementing a generic substitution policy? Third, if the answer was ‘yes’ to both questions, then approximately what amount could Michigan save per year by implementing the generic substitution policy? This research found that Michigan could save $170 million by implementing a generic substitution policy in the prescription drugs program within the selected six-year period between 1999 to 2010 . In 2010, Michigan could save more than 16 million dollars by only prescribing generics, instead of ten brand drugs. A total savings from generics could be approximately $40 million if only generics were prescribed instead of brand drugs. The total amount could be much higher if the multivitamin category was included.

Access Setting

Dissertation-Open Access

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