About GPhA

According to a new analysis conducted by IMS Health and commissioned by the Generic Pharmaceutical Association (GPhA), generic medicines 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.

The Study’s Findings

The new analysis shows that from 1998 to 2004, savings from generics increased steadily at an annual rate of between 3% and 10%, 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.

The higher growth rates seen during the most recent years of the study were driven by three factors: an increase in the overall percentage of generic utilization from 61% entering 2006 to 69% by the close of 2008;
the successful implementation of the pivotal Hatch-Waxman reforms within
2003 Medicare Modernization Act; and the loss of patent protection by several
brand-name blockbuster drugs, including Pravachol®, Ambien®, Fosamax®,
Zoloft® and Zocor®.

The study demonstrates a clear fact: the Hatch-Waxman Act, which gave birth to the modern generic pharmaceutical industry, is one of the most important pro-consumer pieces of legislation passed in the last 25 years. It established a balance between protecting intellectual property, that provides the incentives to innovate new medicines, and encouraging the development of safe, effective and more affordable generic versions of existing drugs. 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.

What We Need to Do

The IMS analysis shows the remarkable savings that generic medicines bring to the health care system. The fact is that a 3% increase in the national overall generic utilization rate could yield approximately $10 billion in additional savings; and in the Medicaid program alone, a 3% increase in generic utilization would generate approximately $1.4 billion in added savings.

It is clear that the Obama Administration and Congress should increase investment in initiatives that would result in even greater savings. Specifically, our elected officials should:

1. Increase investment in FDA’s Office of Generic Drugs (OGD) to ensure the timely review and approval of new generic pharmaceuticals
2. Establish a science-based biogeneric approval pathway that promotes innovation while providing patients access to more affordable versions of lifesaving biologic medicines
3. Encourage greater use of FDA-approved generic medicines in publicly-funded prescription drug benefit plans, such as Medicaid, Medicare and other federal/state programs.