Seniors are acting like true, Adam Smith-style Rational Economic Man and Woman when it comes to their behavior as Medicare Part D enrollees. They go for the more expensive prescription drug brands when covered by the government; once getting to the ‘donut hole,’ though, seniors opt for lower-cost generics.

Medco Health
discovered this in their latest study into Medicare drug trends. Their conclusion is that Medicare could save more money if seniors went for generics 100% of the time.

Rational selection, indeed. In a study from the Kaiser Family Foundation (KFF), Medicare Prescription Drug Plans in 2008 and Key Changes Since 2006, the average out-of-pocket cost for seniors’ generic drugs was $5.32, compared with $29.86 for a brand name Rx.
Of course, generics are on the market because they’re older drugs. The AARP‘s latest Rx Watchdog Report finds that the costs of specialty drugs is ‘soaring,’ from a low of $5,000 to $300,000. These are new-new drugs which won’t achieve generic status for many years. They also target very serious chronic conditions like cancer and multiple sclerosis.

The AARP Report looks at the cost trends in Medicare Part D prescription drugs. AARP found that in the first two years of Part D, 2006 and 2007, prices for the 144 specialty drugs most widely used by seniors increased 7.9% and 8.7%, respectively. These increases were greater than in the two years before the benefit kicked in, at 5 percent in 2004 and 6.8% in 2005.

Health Populi’s Hot Points:
I combined these two news stories because specialty drugs are new drugs. Thus, seniors won’t have a choice to adopt generics in the doughnut hole…and seniors who are prescribed specialty drugs will surely reach the donut hole quickly given the high costs of specialty drugs.
This week, I’ve written every day here in Health Populi about the economics of health care in the U.S. and how costs are burdening Americans. This hasn’t been by design; I hadn’t planned on this being High Health Care Cost Week in this blog. But the evidence continues to mount that illustrates the overwhelming cost problem for Americans: whether seniors insured by Medicare Part D, or covered through their employers, or the uninsured.