Low-cost generics saved $734 billion in US: GPhA

GPhA study forecasts even greater savings in future through biogenerics and expanding generic use.

Generic pharmaceuticals saved the American health care system more than $734 billion in the last decade (1999-2008), with approximately $121 billion in savings in 2008 alone, said a report released by the Generic Pharmaceutical Association (GPhA) – the umbrella body representing generic drug makers.

Generic savings increased steadily at an annual rate of between 3% and 10% from 1999 to 2004, with savings growing from $49 billion in 1999 to $69 billion in 2004. Beginning in 2005 and continuing through 2008, the savings generated by generics grew at a double-digit annual pace, with the highest growth rate coming in 2008 when the savings topped $121 billion, a full 20% ahead of the prior year, said GPhA in its report citing an independent analysis commissioned from IMS Health, the leading healthcare market intelligence company.

“In 1984, it was predicted that the Hatch-Waxman Act would save our country $1 billion in the first decade. Now, generic medicines save more than that every three days,” said GPhA President and CEO Kathleen Jaeger.

“These savings are truly remarkable and demonstrate the real value of generic medicines for consumers and the entire health care system,” added Jaeger while releasing the analysis which as part of its year long celebration of the 25th anniversary of the 1984 Drug Price Competition and Patent Term Restoration Act, commonly called the Hatch-Waxman Act.

In the mid 1990s, the Congressional Budget Office released an analysis showing that in 1994, the 10th anniversary of the enactment of Hatch-Waxman, annual savings from generics had reached approximately $8 billion to $10 billion.

The new data released showed that by 1999 — 15 years after Hatch-Waxman became law — generics were generating $49 billion in annual savings.

The GPhA report pointed out two factors as prime drivers for the higher generic growth rates during the more recent years. First, there is an increase in the overall percentage of generic utilization from 61% entering 2006 to 69% by the close of 2008. The second being the loss of patent protection by several brand-name blockbusters, including Pravachol, Ambien, Fosamax, Zoloft and Zocor.

Generics introduced prior to 1999, generated approximately $552 billion of the $734 billion in total savings, the analysis found.

Savings generated by generic products introduced between 1999 and 2008 provided an additional $182 billion in savings during the period, with nearly half of this coming from 2006 to 2008. Approximately 60% of the $121 billion in savings achieved in 2008 came from generics approved over the past 10 years.

Metabolism, cardiovascular, anti-infectives, and central nervous system (CNS) are the treatment categories that have experienced the highest growth in savings as a result of generic utilization.

Cardiovascular and CNS therapeutic categories contributed more than 57% of the total savings between 1999 and 2008, totaling some $420 billion. While metabolism and anti-infective generics combined to account for an additional 19% of the savings. In total, these four therapeutic categories resulted in overall savings of $561 billion, or 76% of total savings.

“To give some context to the magnitude of the savings created by generic pharmaceuticals over the past decade, one needs only consider that the $734 billion exceeds the cost of the Troubled Assets Relief Program approved last fall, and is nearly the cost of the American Recovery and Reinvestment Act approved in February,” Jaeger noted.

The Hatch-Waxman Act was perhaps the most important piece of pro-consumer legislation enacted over the past 25 years. It established a balance between protecting intellectual property, which provided the incentives to innovate new medicines, and encouraging the development of safe, effective and more affordable generic versions of existing drugs.

“Among the flawed arguments during the debate over Hatch-Waxman in 1984 was the claim that generic competition would harm innovation. In fact, since the enactment of Hatch-Waxman generic competition has helped unleash unprecedented investment in new drug research and development, which in turn has led to a period of unparalleled pharmaceutical innovation,” Jaeger said.

GPhA study predicted even higher savings from generics in future through increasing investment in FDA’s Office of Generic Drugs (OGD) to ensure the timely review and approval of new generic pharmaceuticals;establish a science-based biogeneric approval pathway and encouraging greater use of FDA-approved generic medicines in publicly-funded prescription drug benefit plans, such as Medicaid, Medicare and other federal/state programs.

For example, a 1% increase in the generic utilization rate in the Medicaid program could yield approximately $490 million in added annual savings.

“The data on the tremendous savings generated by generic competition provide dramatic evidence that increasing the availability and use of generic medicines are immediate steps that can be taken to further increase health care savings,” Jaeger said.

According to IMS statistics, the generic substitution rate in the US in 2008 was approximately 69%, with generic medicines filling more than 2.6 billion of the approximately 3.8 billion prescriptions dispensed. However, spending on generic prescriptions accounted for just 16 cents of every dollar spent for prescription medicines.

GPhA commissioned IMS Health in early 2009, to conduct an analysis of the savings created by generic utilization from 1999 through 2008. The objective was to quantify the total cost savings generic pharmaceuticals provide to the overall US health care system. The analysis included only those pharmaceutical molecules for which generic and brand products were available to consumers and prescribers. The analysis utilized IMS data of sales and volumes for both branded and generic products to estimate cost savings.

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry.