Drugs prescribed by nonproprietary names but dispensed by brand names

Of the 650 prescription invoices which we analyzed in detail, 91 showed that drugs had been prescribed by their nonproprietary names, but the pharmacists had indicated on the invoices that they dispensed the drugs by their brand names. For 76 of these invoices, the prices of the drugs dispensed were higher than the most expensive manufacturers' prices for the drugs by their nonproprietary names. The PDPW paid a total of $446.11 for these 91 drugs. If the drugs had been dispensed by their nonproprietary names, the PDPW would have paid a total of only $191.47 on the basis of the manufacturers' price at the median of the range for each drug and would have saved $254.64, or 57 percent, of its cost.

The following summary of the 91 prescription invoices discussed above shows the 6 drugs most frequently prescribed by their nonproprietary names but dispensed by their brand names. The summary also shows the total amount paid for the drugs dispensed by their brand names and the lowest, median, and highest prices that would have been paid for the drugs if dispensed by their nonproprietary names. All comparative prices shown are based on the prices of drugs of the same quantity and strength as that of the drugs dispensed.

Drugs prescribed and dispensed by nonproprietary names but not dispensed at available lower prices

Of the 650 prescription invoices in our net sample, 59 were for drugs prescribed and dispensed by their nonproprietary names. We compared the prices paid for these drugs with the range of prices published in the Red and Blue Books, including allowable markup. Our analysis showed that the prices paid for 11 of these prescriptions exceeded the highest published wholesale price plus the allowable markup. Of the prices paid for the remainder of the 59 prescriptions, 6 equalled the highest prices, 36 were between the median and the highest, and 6 were below the median published wholesale price including markup.

The following schedule shows the amounts paid by the State, the prices available based on the wholesale price ranges, and the difference if the lower available prices were used for 3 of the 11 prescriptions that were paid in amounts exceeding the highest published price including allowable markup.

The following schedule shows three of the six prescriptions that were paid for in amounts equal to the highest published price including allowable markup.

The following schedule shows 3 of the 36 prescriptions that were paid for in amounts between the median and highest published price including allowable markup.

For the six prescriptions billed below the median published price, savings would also be available if the drugs were dispensed by their nonproprietary names at the lowest of the range of manufacturers' prices published in the red and the blue books.

The Pennsylvania Department of Public Welfare paid a total of $169.60 for the 59 drugs prescribed and dispensed by their nonproprietary names. If the cost of the drugs dispensed had been based on the manufacturers' prices at the median of the range for each drug, the Pennsylvania Department of Public Wel

fare would have paid a total of $88.93 and would have saved $80.67, or 48 percent, of its cost.

Extensive use of nonproprietary drugs by other agencies

Our review showed that nonproprietary drugs are used extensively by various municipal and nonprofit private hospitals, the Veterans' Administration (VA) outpatient clinic, and the city procurement department section for medical supplies in Philadelphia, Pa. We found that generally the hospitals and the VA clinic urge physicians to prescribe drugs by their nonproprietary names whenever feasible. Moreover, in nearly every case the policy of the hospital or clinic requires staff physicians to authorize hospital pharmacies to dispense drugs by the nonproprietary names even though the physician prescribes drugs by their brand names, unless the prescribing physician specifically indicates that no substitution is to be made.

Philadelphia procurement department personnel who purchase drugs for the Philadelphia General Hospital and city health institutions told us that they purchase all drugs by their nonproprietary names and on a competitive bid basis. Also, we have been told that, of the 67 nonproprietary drugs identified in our review, all but 7 have been procured by the city at one time or another. HEW and State procedures relating to the use of nonproprietary name drugs

The Bureau of Family Services has distributed to Pennsylvania and all other States a publication, entitled "Pharmaceutical Services," which states, in part, that a drug ordered by generic name usually costs less than the same drug ordered by a proprietary name. BFS officials informed us that each State determines its own policy as to the medical needs of its welfare recipients and the manner in which these needs are to be fulfilled. Our review of the Pennsylvania State plan showed that it was Pennsylvania Department of Public Welfare's intention to pay for adequate medical care, in accordance with accepted standards of good medical practice. The State does not employ any procedures which would encourage the prescribing and dispensing of nonproprietary name drugs which are available at lower costs than those for brand-name drugs.

In addition to information we obtained during our review of the procedures and controls used by the State of Pennsylvania over the cost of drugs provided welfare recipients, we obtained information relative to the manner in which other States control their costs of medical care for welfare recipients. We found that several States utilize a drug formulary, which is primarily a listing of drugs by their nonproprietary names with established maximum prices that the State will pay for such drugs. In exceptional cases, where physicians deem it essential to prescribe drugs that are not included in established formularies, these drugs must be justified and advance approval obtained from the State welfare agency. Although our review showed that HEW had not required States to prepare formularies, some States are using them as a means of control over their drug costs.

During our review, Pennsylvania employed a pharmacist consultant who, in addition to his other duties, was beginning to explore the possibility of establishing a formulary. At the conclusion of our review, we were informed that the State was in the process of preparing a formulary to be considered for adoption in Pennsylvania and that many of the drug items we discussed would be included therein. The formulary had not been established as of January 1966.

A.M.A.'S ATTITUDE ON PRESCRIBING BY NONPROPRIETARY NAME

HEW and State comments and proposed action

We proposed to the Secretary of Health, Education, and Welfare that steps be taken to bring about greater emphasis by the State of Pennsylvania aimed at the increased use of nonproprietary drugs for welfare recipients.

The State welfare agency informed the Department in a letter dated May 24, 1965, concerning our proposal, that to ask physicians to prescribe generically would subject the public assistance recipients to the possibility of receiving secondclass medical treatment. The State indicated that the majority of physicians do not prescribe generically because the newer drugs have been developed since they received their educations and it is unrealistic to expect the physicians to keep up with the newer drugs without relying on the drug companies. The State explained that it is not the State welfare agency's function to provide such education to physicians.

HEW officials did not fully agree with the State's observations, and, in a letter dated September 10, 1965, the Assistant Secretary for Administration advised us that there were ways in which State welfare departments could exercise better