Generic pharmaceuticals saved US healthcare $734 billion over last
19 May 2009
The use of generic pharmaceuticals saved the American healthcare
system more than $734 billion in the last decade (1999-2008), with
approximately $121 billion in savings in 2008 alone, according to a
report published by the Generic Pharmaceutical Association (GPhA) and
commissioned from IMS Health.
GPhA released the analysis 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 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
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
US$8 billion to US$10 billion. The new data released today shows that by
1999 — 15 years after Hatch-Waxman became law — generics were generating
US$49 billion in annual savings.
From 1999 to 2004, generic savings increased steadily at an annual
rate of between 3% and 10%, with savings growing from US$49 billion in
1999 to US$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 US$121 billion, a full 20% ahead of the prior year.
The higher growth rates seen during the more recent years of the
study were driven by two factors:
- an increase in the overall percentage of generic
utilization from 61% entering 2006 to 69% by the close of 2008; and
- the loss of patent protection by several brand-name
blockbusters, including Pravachol, Ambien, Fosamax, Zoloft and Zocor.
The analysis also found that generics introduced prior to 1999,
generated approximately US$552 billion of the US$734 billion in total
savings. Savings generated by generic products introduced between 1999
and 2008 provided an additional US$182 billion in savings during the
period, with nearly half of this coming from 2006 to 2008. Approximately
60% of the US$121 billion in savings achieved in 2008 came from generics
approved over the past 10 years.
Treatments in the therapeutic categories of metabolism,
cardiovascular, anti-infectives, and central nervous system (CNS) have
experienced the highest growth in savings as a result of generic
utilization. More than 57% of the total savings between 1999 and 2008,
totaling some US$420 billion, came from the cardiovascular and CNS
Generic metabolism and anti-infective drugs combined to account for
an additional 19% of the savings. In total, these four therapeutic
categories resulted in overall savings of US$561 billion, or 76% of
"To give some context to the magnitude of the savings created by
generic pharmaceuticals over the past decade, one needs only consider
that the US$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 is perhaps the most important piece of
pro-consumer legislation enacted over the past 25 years. It established
a balance between protecting intellectual property, which provides 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 noted that the study is predictive of the greater savings that
could be achieved in future years through the implementation of
- increase investment in FDA's Office of Generic Drugs (OGD)
to ensure the timely review and approval of new generic
- establish a science-based biogeneric approval pathway that
promotes innovation while providing access to more affordable
versions of lifesaving biologic medicines; and
- encourage 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 US$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.
In early 2009, GPhA commissioned IMS Health to conduct an analysis of
the savings created by generic utilization from 1999 through 2008. The
principle objective of the analysis was to quantify the total cost
savings generic pharmaceuticals provide to the overall US healthcare
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. For an explanation of the
study methodology see www.gphaonline.org.
The generic substitution rate in the US in 2008, according to IMS
statistics, 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.
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