Superstar Drugs Debut as Generics

Designer labels may excite fashionistas and sports-car fanatics, but many consumers are happy to stock their medicine cabinets with less-expensive generic alternatives to brand-name prescription drugs. Value-conscious shoppers will soon be able to pick from a bumper crop of generics. And they'll get a boost from insurers and employers who offer financial incentives to hop on the cut-rate bandwagon.

Assuming your doctor okays your switch to a generic alternative, you may save up to 80% off the cost of a brand-name drug. For example, a year's supply of the antidepressant Prozac costs $1,863. But the same amount of its generic equivalent, fluoxetine, costs just $433, according to a recent price survey by research firm Wolters Kluwer Health. "You get all the premium quality of a brand-name drug -- you just pay less," says Dr. Bill Thomas, a Sherburne, N.Y., physician who specializes in elder care.

If drug coverage is included in your health insurance, you probably have a smaller co-payment for generics. Some employer plans even skip the co-pay altogether for generics, as a way of encouraging their members to switch to less-expensive alternatives. If you don't have prescription-drug coverage, buying generics will help you hold the line on out-of-pocket expenses.

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Coming soon

What if your prescription medication isn't available in generic form? Wait a bit. Brand-name drugs with U.S. sales of about $30 billion could lose patent protection over the next two years. Five blockbuster drugs -- Flonase, Pravachol, Toprol-XL, Zocor and Zoloft -- went generic in 2006, and eight more pharmaceutical superstars are expected to debut as generics by 2008. As a result, consumers, employers and insurers could save nearly $50 billion by 2010.

Joan Zeleski has already grabbed her share of savings by switching to generics. The 51-year-old nurse used to take Desyrel for insomnia and paid $45 for a three-month supply. By switching to the generic version, she saves $36 on the same amount.

For convenience and the employee discount, Zeleski buys prescriptions from her hospital's pharmacy. Most people don't have that option, but they can still save by shopping around.

Wal-Mart rolled out a headline-making generic-drug program in 27 states late in 2006. Under the program, you can buy a 30-day supply of more than 140 generic drugs for just $4 per drug. The world's largest retailer says it plans to bring the discount program to as many states as possible. Drugs on Wal-Mart's $4 list include 12 of the top 20 most commonly prescribed medications. And you don't need insurance coverage or a discount card to qualify for the savings.

Other retailers also offer competitive pricing. Target says it matches Wal-Mart's generic-drug prices in most locations. Midwestern discount retailer Meijer fills prescriptions for some antibiotics, such as penicillin, free.

Savings tips

Finding the best deal on generics sometimes takes a little detective work. A family paying for five common generic drugs could save more than $2,000 a year on top of the savings over brand-name medications just by looking for the best deals, according to a survey of generic-drug prices by Consumer Reports.

Check prices both in stores and online. Consumer Reports found that big discount stores, such as Wal-Mart and Target, and online pharmacies affiliated with drugstore chains, such as CVS.com, tend to charge the least. Costco warehouse stores and Costco's Web site had the lowest generic prices in the survey. And you don't have to pay Costco's $50 membership fee to fill your prescriptions. (For more on Costco and other warehouse stores, see Great Things from Big Boxes.)

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Drug prices vary depending on how much you buy and in what form. Tablets, for example, could be cheaper than capsules. And a 90-day supply may cost less than the typical 30-day prescription. Ask your doctor for a prescription you can buy in bulk, and talk to your pharmacist about the cheapest and safest form of each medication. With some medicines, you might save by buying large pills and splitting them into smaller doses. But check with your doctor or pharmacist to see if pill-splitting is appropriate for your prescription.

Don't be shy about asking your pharmacy if it can meet or beat a competitor's price. You might get a bargain and save yourself the hassle of moving your business elsewhere.

North of the border

Sure, you can save up to half the price of brand-name drugs if you buy from pharmacies outside the U.S. But importing medications from any foreign country except Canada is illegal. In Canada, purchases must be made in person with a valid U.S. prescription approved by a Canadian doctor.

That legal exception does not extend to buying Canadian drugs over the Internet. It's illegal to order drugs from Canada online, but U.S. Customs and Border Protection says it will no longer routinely seize packages of non-narcotic prescription drugs mailed from Canadian pharmacies. It will, however, continue to conduct random searches for counterfeit medications.

Some consumers, particularly those who rely on brand-name drugs that do not have generic alternatives, think the savings available on imported drugs is worth the risk. If you are considering this route, shop only at Canadian pharmacies and Web sites, says Steven Findlay, managing editor of Consumer Reports Best Buy Drugs. There's less chance of getting ripped off with fake drugs or endangering your health with weak or tainted medicine, Findlay says.

Some Canadian sites have been vetted by state governments and scrutinized by federal regulators. Minnesota, New Hampshire, Washington and Wisconsin, for example, have started programs to help state workers and other residents buy low-cost drugs from Canada (go to www.rx.wa.gov or www.minnesotarxconnect.com).

But it's not worth the trip just to buy generic drugs. "People aren't going to Canada to save $6," says Stephen Schondelmeyer, director of the PRIME Institute, which studies the economics of the pharmaceutical industry.

Help from Uncle Sam

You don't need to use your passport or test the legal boundaries to save on prescription drugs. All you have to do is sign up for a flexible spending account, if your employer offers one.

With an FSA, you can set aside pretax dollars to spend on out-of-pocket medical expenses, including over-the-counter and prescription drugs. So if your medications cost $1,500 per year and you're in the 25% tax bracket, avoiding federal income and Social Security taxes means Uncle Sam will subsidize almost $500 of your purchases. (Dodging state income taxes saves you even more.)

There is a catch: With an FSA, you lose what you don't use by the end of the plan year. But many employers give their workers until March 15 of the following year to empty their flex accounts. Check to see if your plan is one of them.