Generic drugs foster competition in the pharmaceutical market. Chester “Chip” Davis, Jr. of the Association for Accessible Medicines (AAM) reveals the data behind generic competition and elaborates on opportunities for further savings.
The American public is clamoring for systemic changes to address skyrocketing drug prices. Specialty drugs—a growing category that includes biologics and other complex medicines—are of particular concern. These now account for 50 percent of drug spending.
The Association for Accessible Medicines has an important role to play in this dialogue. Our team is preparing the 11th annual edition of our Access and Savings Report. Subtitled “The Case for Competition,” this publication details how America’s patients and our health care system continue to save through generic drug competition and how future savings are possible through biosimilar alternatives to brand-name biologic medicines.
Some topline data from the report, which we publish based on findings by IQVIA:
- Traditional generic savings totaled $293 billion in 2018; 10-year savings amount to nearly $2 trillion.
- Across the United States, more than 4 billion generic prescriptions were filled in 2018. That’s 90 percent of dispensed prescriptions – an increase from 75 percent in 2009. But generics account for only 22 percent of total drug spending. As a result, the future affordability of medicines for patients is inextricably linked to the success of the generic and biosimilar industry
- At $5.63, the average copay for a generic prescription is almost one-seventh of the average copay for a brand-name prescription. That means more money in U.S. patients’ pockets.
- Together, generic usage by Medicare and Medicaid saved taxpayers more than $137 billion last year, with $2,254 in average savings per Medicare beneficiary and $817 in savings per Medicaid enrollee.
- Generic medicines taken by adults age 40-64 accounted for $127 billion in savings, while generics taken by seniors (over age 65) accounted for $102 billion in savings.
- Average savings by state exceeded $5.7 billion in 2018.
In one word, the reason for these savings is “competition.” As the Pew Charitable Trusts noted earlier this year, “Generic drugs generate competition and reduce overall drug spending.” These savings make a difference across the U.S. health care system, with nearly half of all savings stemming from use by patients with private health insurance.
Trust is another critical element driving savings. The FDA unequivocally states, “The U.S. drug supply chain remains one of the safest in the world.” Thanks to the standardized, transparent and dynamic system our nation maintains for ensuring quality in the drug supply chain (described in a previous column), America’s patients place their trust in the FDA-approved medications that their doctors prescribe.
The pictured painted by the Access and Savings Report, however, is far from perfect. We see numerous opportunities to save patients and taxpayers even more money. Some areas for improvement include:
Medicines that do not enter the market cannot help patients. AAM has investigated this issue and found that while FDA has approved 166 first-time generic drugs since 2016, fewer than half are commercially available. This phenomenon is not limited to generics. In fact, although the FDA has approved 21 biosimilars, only 7 are currently commercially available. This finding reflects an increasing number of market breakdowns and policy missteps that challenge the sustainability of the generic and biosimilar markets.
There are different factors that affect poor launch rates; perhaps one of the most egregious factors is patent abuse perpetrated by brand manufacturers. Patent abuse consistently blocks generic and biosimilar entry, forcing higher prices for their brand products. In fact, a recent Biosimilars Council white paper found that the U.S. health care system has lost $7.6 billion in savings since 2015 as a result of brand-biologic manufacturer patent barriers and the Medicare program has been unable to realize $1.5 billion from available biosimilars since 2015.
In addition, rebate traps and other anti-competitive contracting practices implemented by brand manufacturers also have a negative effect on the viability of the generic and biosimilars markets. For example, when a generic or biosimilar finally manages to enter the market, manufacturers of brand products, which have been enjoying years of exclusivity, have been known to threaten to cancel rebates to payers unless the generic or biosimilar is effectively excluded from formulary. Sometimes the threat encompasses a bundle or portfolio of unrelated products. According to Kaiser Health News, “This so-called rebate trap joins a long history of efforts by makers of brand-name drugs to stifle generics.… Because rebate contracts are secret, nobody knows the full extent of the practice nor how much it costs the health system in unrealized savings.”
Higher Out-of-Pocket Costs for Seniors
Over the past four years, seniors have been forced to spend almost $22 billion in unnecessary out-of-pocket costs because of Medicare Part D plans’ increasing placement of lower-cost generics on brand-drug formulary tiers with higher copayments. It is important that policymakers ensure that generic drugs are automatically placed on formulary tiers with lower cost-sharing immediately upon launch so that seniors reap the full benefit of these lower-cost options.
Preserving State Savings
For a variety of reasons, the states have taken up the charge of addressing the issue of prescription drug affordability. Our state policy team educates legislators in every state on the value that generic prescription drugs represent; for example, savings in California alone amounted to $26 billion in 2018. Generics saved the average state’s Medicaid program $917 million. In order to protect those savings, legislators need to understand the facts.
Now is the time to align government policies to support greater access and use of competitive, lower-priced generics and biosimilars. The President’s Blueprint to Lower Drug Prices, the FDA Biosimilar Action Plan, and the FDA Drug Competition Action Plan represent serious commitment on the part of government. I invite patients, business and political leaders as well as experts from throughout the health care sector to join us in this mission to provide accessible medicines at the earliest possible opportunity.