Use of Generic Drugs Saved $1.07 Trillion in Past Decade

To deal with escalating costs, health insurers have proposed several ways to control this problem. Near the top of their list is increasing reliance on generic drugs rather than more expensive branded products since generics, besides being cheaper, provide similar safety and efficacy.

A recently released report supports the former notion. From 2002 to 2011, the use of generics saved the United States $1.07 trillion, including $192.8 billion last year, according to the fourth annual Generic Drug Savings study published by the Generic Pharmaceutical Association (GPhA). The IMS Institute for Healthcare Informatics, a division of IMS Health, supplied the data and conducted the study of 2750 drugs for which brand and generic versions were available.

In other findings, the savings for generics in 2011 were 22% more than in the previous year, while generics entering the market since 2002 have saved $481 billion in the past decade. Generic central nervous system drugs and cardiovascular drugs account for 57% of annual savings, according to the report.

“The analysis clearly demonstrates that any effort to reduce healthcare costs—whether on Capitol Hill or in state legislatures—must recognize the billions of dollars in savings that can be achieved through the use of generic medicines,” the authors of the report wrote. “For more than 25 years, generic prescription drugs have allowed millions of Americans to get the medicine they need at an affordable cost. As new healthcare reform policies are implemented, the savings generated will help make it possible to improve lives for less.”

The trend toward generics is likely to continue for a long time.

At the 2011 Academy of Managed Care Pharmacy Educational Conference, IMS Health vice president Douglas Long said generics accounted for 75.5% of prescriptions dispensed in 2010, but only 19.9% of spending. By 2015, generics will have an 86% market share, according to Mr. Long.

Several branded drugs have lost their patents recently, including Lipitor^® (atorvastatin calcium) and Plavix^® (clopidogrel bisulfate), the highest-selling drugs in 2011, according to Medco Health Solutions data. Generic versions of Lexapro^® (escitalopram oxalate), Seroquel^® (quetiapine fumarate), and ACTOS^ä (pioglitazone) have also become available since the beginning of the year.

The GPhA report revealed that for the 5 years ending in 2011, patent expirations and first-time generic competition led to $65.2 billion in savings. Between 2012 and 2015, IMS Health projects that drugs with $67 billion in annual sales will lose patent protection as will additional branded biologics with $25 billion in annual sales.

Rapid growth in the generic industry began in 1984 when Congress enacted the Drug Price Competition and Patent Term Restoration Act. This bill increased competition and forced generic manufacturers to demonstrate that their products were equivalent to branded products; it also created a system of abbreviated drug applications, a process that was less expensive and faster than the previous method.

This summer, the federal government took another step towards generics legislation. On July 9, President Barack Obama signed the Generic Drug User Fee Amendments (GDUFA) into law, requiring manufacturers to pay a fee to the FDA in return for faster inspections and review times for generic drug approval decisions. The program is modeled after the Prescription Drug User Fee Act, which began in 1992 and has been renewed every 5 years, including in 2012.

Under GDUFA, the FDA will require companies to identify facilities used for manufacturing generic drugs and associated active pharmaceutical ingredients and help establish standards for foreign- and United States-based companies to follow during drug development. According to the GPhA report, >2000 generic drug applications are awaiting a decision, including 365 for first-time generics.

The FDA agreed that by the fifth year of GDUFA, it would review and act on 90% of original, unamended abbreviated new drug applications within 10 months of the submission date. The agency also said it would issue complete response letters to all applicants. Generic manufacturers will pay fees annually and for new applications beginning on October 1, 2012, although the amounts have not yet been determined.

The Patient Protection and Affordable Care Act also created abbreviated approval pathways for biosimilars, which are generic versions of FDA-approved biologics. The GPhA report indicated biosimilars would save $42 to $108 billion during the next 10 years. It cited a Congressional Budget Office estimate that biosimilars would initially cost 25% less than their brand counterparts and eventually be 40% less expensive.

“The remarkable findings demonstrated in this report are a testament not only to the generic industry’s tremendous accomplishments over the past decade, but to the even greater achievements that are still to come,” GPhA president and chief executive officer Ralph G. Neas said in a news release. “The Generic Drug Savings study shows conclusively that, as Congress and the White House gear up for the fiscal challenges facing them in the coming year, generic and biosimilar utilization are the best places to go for the ‘offsets’ that everyone will be desperately seeking. The sustainability of the health care system and the national economy depend in significant measure on the availability of affordable medicines.”