in lieu of comparable brand name drugs or the more expensive nonproprietary name drugs.

A projection of the results of our examination of 650 prescription invoices paid in March 1964 by the State of Pennsylvania, covering the cost of drugs dispensed to welfare recipients, indicates that savings of from $722,500 to as much as $1,501,800 could possibly have been realized during fiscal year 1964; the Federal share of such savings would amount to from about $353,900 to as much as $705,400. The higher savings could have been realized only if (1) the least expensive nonproprietary name drugs had been dispensed in all cases instead of (a) drugs prescribed and dispensed by their brand (trade) names and (b) drugs dispensed by their brand names although prescribed by their nonproprietary names and (2) the least expensive nonproprietary name drugs had been dispensed in certain cases where drugs were prescribed and dispensed by their nonproprietary names. The lower savings could have been realized if the most expensive nonproprietary name drugs had been dispensed in all cases instead of (1) drugs prescribed and dispensed by their brand names and (2) drugs dispensed by their brand names although prescribed by their nonproprietary names.

We are not suggesting in this report that the dispensing of the least expensive drug available, or a drug less expensive than that actually dispensed, would in all cases have been consistent with good medical practice, but we have shown the range of possible savings available through the use of less expensive drugs in order to convey the range within which economies may have been possible had maximum effort been made by all concerned to insure the dispensing of the least expensive drug consistent with the welfare of the recipient.

Also, in computing the range of possible savings, we have assumed that arrangements could have been made to have the less expensive drugs available at the dispensing pharmacies.

We selected for detailed review a random sample of 2,505 prescription invoices from the 211,158 invoices processed by PDPW in March 1964, a month which appeared to be typical for the year on the bases of prescription volume and dollar cost. Of these, we eliminated 1,855 prescription invoices consisting of

1. Drugs for recipients of the blind pension and general assistance categories which receive no Federal matching and are paid for entirely by the State (500 prescription invoices).

2. Brand name drugs supplied only by one company, which are not available under a nonproprietary name (1,152 prescription invoices).

3. Drugs billed at the minimum price of 75 cents as provided for in the PDPW manual (157 prescription invoices).

4. Incidental medical items which are limited to the prices specified in the PDPW manual (40 prescription invoices).

5. Drugs dispensed at the lowest available price (six prescription invoices). The remaining 650 prescription invoices (25.95 percent of the random sample) constituted our net sample and are the basis for our findings.

In our detailed examination of the 650 prescription invoices, we compared the price paid by PDPW for each prescribed drug dispensed to welfare recipients with the range of manufacturers' prices for the same drugs under their nonproprietary names. The price of each drug dispensed was the amount paid by the State to the vendor although the range of manufacturers' prices for each drug under its nonproprietary name was obtained from wholesale druggist price lists as shown in American Druggist Blue Book and Drug Topics Red Book commonly referred to as the "Bluebook" and the "Redbook" which are widely used by pharmacies. These books list the drugs available on the market by their brand names and nonproprietary names, the names of the manufacturers of these drugs, and the related prices.

By

For the purpose of our examination, the prices compared included wholesale drug prices plus a 50-percent markup as permitted by the PDPW manual. comparing the prices paid by the State for the drugs dispensed with the range of manufacturers' prices for the drugs under their nonproprietary names, we determined the lowest, median, and highest amount of estimated savings that could have been realized if these drugs had been dispensed by their less expensive nonproprietary names.

Our review of 2,505 prescription invoices selected on a random sample basis from those paid in the month of March 1964 showed that, for the net sample of 650 prescriptions, savings of from about $718 to as much as $1,487 could have been realized if less expensive nonproprietary name drugs were used. In line with the results of our review, 25.95 percent, or about 54,800, of the approximately 211,200 prescription invoices paid in the month of March 1964 may have been

subject to possible savings through maximum use of less expensive nonproprietary name drugs. Projecting the estimated savings in our net sample to the entire month of March, we estimate that combined savings of from about $60,200 to $125,200 could possibly have been realized by the Federal and State Governments. Similarly, we estimated that savings of from $722,500 to $1,501,800 could possibly have been realized on about 657,600 prescriptions by both the Federal Government and the State of Pennsylvania during the entire fiscal year 1964. The following schedule shows the estimated savings for the 650 prescriptions in our net sample and our projections of the estimated savings for the month of March 1964 and fiscal year 1964.

1 The negative figure resulted because the price PDPW paid for many of the 59 drugs dispensed by their nonproprietary names was less than the highest listed manufacturer's price for these drugs in the red and the blue books.

By applying the specific formulas stipulated in the Social Security Act relating to each category of assistance, we determined that, except for the aid to the blind category, the average payment per recipient in the State of Pennsylvania was below the maximum average monthly payment that could be participated in by the Federal Government. Accordingly, with this exception, our review showed that for these categories both the Federal Government and the State would share in any savings resulting from greater use of less expensive nonproprietary name drugs. Since the State's average payments per recipient in the aid to the blind category of assistance were above the maximum average monthly payments that could be participated in by the Federal Government, any savings in the cost of drugs for this category of assistance would not be shared by the Federal Govern

ment.

The Federal and State shares of the savings that we estimated may have been realized for fiscal year 1964, by category of assistance, are as follows:

The details of our findings are discussed more fully on the following pages.

Drugs prescribed and dispensed by brand names

In our net sample of 650 prescription invoices, 500 prescription invoices, or 77 percent, were for drugs prescribed and dispensed by their brand names. The PDPW paid a total of $1,861.54 for these drugs. If these drugs had been pre

scribed and dispensed by their nonproprietary names from manufacturers' prices at the median of the range, the PDPW would have paid a total of $901.59 and would have saved $959.95, or 51 percent, of its cost. For example, on 41 prescription invoices the brand name drug "Peritrate" was prescribed and dispensed at a total cost to PDPW of $178.55. Had the drug been prescribed and dispensed by its nonproprietary name, pentaerythritol tetranitrate, from manufacturers prices at the median of the range, the total cost to PDPW would have been reduced by about $131.08.

The following summary shows the 10 brand name drugs most frequently dispensed in our net sample. It shows also the total amount paid during the month of March 1964 for all the 500 drugs dispensed by their brand names and the lowest, median, and highest prices available for the drugs 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 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.