Transactions of the International Conference on Health Information Technology Advancement

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High health care costs have left millions of people unable to buy health insurance and has broadened the state’s responsibility to protect low-income families through Medicaid programs. Increasing health care costs have created severe toll on fiscal management of federal and state governments. Prescription drugs are a significant part of Michigan’s Medicaid costs. Due to the economic recession and the downsizing of auto sector the number of Medicaid beneficiaries in Michigan has increased over the years. Thus it has increased Medicaid prescription drugs program costs at a fast pace, which creates fiscal burden on Michigan in administering the program and providing prescription drugs for its beneficiaries. Michigan has implemented several strategies for cost containment of Medicaid since 2001. These strategies have brought modest results in terms of cost containment in Medicaid prescription drugs program. This study examined whether a generic substitution policy of Medicaid prescription drugs in Michigan would be an efficient and effective cost-containment strategy. In doing so, it emphasizes three questions: First, will a generic substitution policy be an efficient strategy in containing Medicaid prescription drug program costs for Michigan? Second, if not in general, are there any “heavily used” brand drugs for which generic substitutes are available that can Michigan safely reduce Medicaid costs by implementing a higher use of generic substitution, thus saving the state in prescription drug costs through the generic substitution policy? Third, if the answer is yes for the two previous questions, then approximately how much money can Michigan save per year by implementing the generic substitution policy? This research found generic substitution policy as an efficient way in cost containment in Michigan Medicaid prescription drugs program.