New legislation has been introduced into the US Senate which would allow states to keep, on a temporary basis, some of the savings they make from increased use of generic drugs.

The bipartisan Affordable Medicines Utilization Act of 2011 has been introduced by Republican Senators Scott Brown and John McCain and Democrat Ron Wyden, who point to a recent study which found that US states “waste” more than $300 million a year through not utilising generic versions of brand-name drugs.

They describe their bill as "common-sense" legislation which would provide incentives to states to increase generic drug utilisation in Medicaid (the state/federal health programme for people on low incomes) by letting the states keep part of the difference which the federal government receives between the cost of the generic and brand-name drugs. "This saves money for patients, the state and injects more competition into the drug market, which will help lower costs overall," said Sen Wyden.

US states are already able to select generic versions of brand-name drugs for Medicaid enrollees, but they have not reaped the full savings potential that comes from increased generics use, say the Senators, and they point out that this potential will increase in the next few years as the patents on many brand-name drugs expire. Because the federal government pays the states a portion of the cost of prescription drugs purchased through Medicaid, it will see increased savings from wider use of generics, and the bill would give the states a portion of the savings on these which the federal government would receive.

The bill has been welcomed by the Generic Pharmaceutical Association (GPhA) as "exactly the kind of solution those in Washington should look to when searching for ways to rein in our country's health care spending," according to Bob Billings, the industry association’s executive director.

The GPhA points to data from the Centers for Medicare and Medicaid Services (CMS), which shows that in 2010, Medicaid paid on average some $200 for each monthly brand prescription, compared to just $20 for a month's prescription in the generic version. By increasing generic utilisation in Medicaid by just one percentage point, the government and taxpayers would save more than $500 million, it says. 

"As Americans everywhere tighten their belts during this tough economy, the federal government needs to do the same," said Sen Brown, while Sen McCain added: "with our nation in financial crisis and as federal and state health expenditures continue to rise, we must ensure that our health care programmes are efficiently managed."