The Department of Health and Human Services yesterday announced new rules designed to encourage states to use generic drugs rather than higher-cost brand-name drugs in the Medicaid program for the poor.

Rep. Henry A. Waxman (D-Calif.), chairman of the House subcommittee with jurisdiction over Medicaid and a leading advocate of generic drug use, said through an aide, "The department has finally issued regulations saving millions of dollars on drugs in the Medicaid program by using low-cost generic drugs.

"It's about time they did this. They've squandered millions by paying for high-price brand-name drugs when lower-cost generics were available."

In effect, the department has told states that they may choose any outpatient prescription drugs but that HHS will reimburse them only for costs not exceeding 1 1/2 times the price of the lowest-cost available generic, plus a dispensing fee.

The rule will apply where at least three generic substitutes are available for a higher-priced name brand.

If doctors want to insist on a brand name, they may do so by certifying on the prescription that use of the name brand is medically necessary, and HHS will reimburse the cost.

Doctors may not use a check-off box to choose a name brand.

HHS also will pay for a name brand when fewer than three therapeutically equivalent generic substitutes are available.

Dee Fensterer, president of the Generic Pharmaceutical Industry Association, said HHS already has a system to encourage generic drugs in the Medicaid program, but it is so complex that only 12 drugs have been made subject to its provisions.

Fensterer estimated that the new rule will bring immediately into general Medicaid use at least 60 more generic drugs, and eventually more. The Pharmaceutical Manufacturers Association said it is studying the new rule.

Martin Lobel, an attorney representing generic drug groups in connection with the Medicare "catastrophic" health-insurance bill, said that some senators' opposition to a Medicare generic-drug requirement is one factor in the Senate's failure to schedule quick floor action on the bill.

Several senators have put "holds" on the bill, Senate sources said yesterday.

"It is ironic that the administration is moving forward to encourage generics in Medicaid while some senators are moving in the other direction on Medicare" for the elderly, Lobel said.