Medicare participants may soon be able to use generic prescription drugs instead of more expensive brand-name drugs. In late September, Senate Finance Committee Chair Max Baucus (D-MT) added two amendments to his health reform bill that would enable more Medicare recipients to select the more affordable generic drug options, regardless of whether or not they have a Medicare Supplement plan to help them pay for medications. However, there are still some obstacles preventing wide-scale use of generic drugs amongst Medicare participants, according to the General Pharmaceutical Association.
According to the new amendments Baucus made to his health reform bill, Medicare participants would receive a financial incentive for filling a prescription medication and state laws would be studied to determine whether they have a negative impact on the use of generic drugs in federal programs, including Medicare Part A, Medicare Part B, and Medicare Advantage programs.
According to the first amendment, Medicare prescription drug plans would waive the co-pay for the first time a Medicare participant fills a generic prescription. This amendment was filed by Sen. Debbie Stabenow (D-MI). Many Medicare participants now have to pay out-of-pocket for a portion of their medications – or they have to enroll in a Medicare Supplement or Medigap plan that covers prescription drug costs.
The second amendment would specifically require that the Government Accountability Office study state laws that have a negative impact on generic drug use in federal programs, such as Medicare. The study would include an analysis of the laws or regulations that prevent pharmacists from substituting generic drugs for brand-name drugs. In some cases, because Medicare participants are not able to use generic drugs, they have to pay more for Medicare Supplemental insurance or Medigap insurance, unnecessarily increasing costs to these Medicare participants.
According to the General Pharmaceutical Association, carve-outs have been a significant problem within federal programs. Most consumers who have private healthcare plans can take advantage of the “free generic fill” practice, which enables a pharmacist to substitute a generic drug for a brand-name drug. Moreover, many consumers are able to take advantage of financial incentives that encourage them to try generic alternatives to brand-name drugs.
However, Medicare and Medicaid plans are prohibited by federal law to offer incentives that would influence a consumer to select one type of drug over another. An example of such remunerations could include co-pay waivers that may encourage a consumer to try a generic brand of medication.
According to the Coalition for a Competitive Pharmaceutical Marketplace – an organization that represents manufacturers of generic drugs – pharmaceutical companies should be able to offer incentives that would encourage consumers to try generic medications because pharmaceutical companies are not considered to be healthcare providers and they do not directly bill the government. Under Baucus’ bill, there would be no legal barrier preventing such incentives from being offered.
The General Pharmaceutical Association has estimated that even an increase in generic drug use as small as two percent could save the government $1 billion per year on pharmaceutical costs for government-sponsored healthcare programs, including as Medicare.
The health reform bill is still being debated and amended, but, according to groups on both sides of the aisle, good progress is being made as these important nationwide issues are being discussed by Congress and key groups around the country.
Are you looking for information about Medicare programs that may help you pay for your medications? For help finding the best Medigap plan for your situation, contact Medigap Advisors at 866-323-1441.

Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage.