US spending on generic drugs drops

generic drugsDue to fierce competition among drug manufacturers and pressure from insurers lowered prices, American consumers and health insurers saved about $1 billion on generic drugs in the past 12 months ending September, reports IMS Health.

According to the report, total spending on generic drugs reduced by 2.7 percent to $33 billion, the biggest decline in at least a decade. Furthermore, the average price pharmaceutical companies charged wholesalers for the generic drugs fell 8 percent while consumer demand increased 5.4 percent.

The IMS Health report said that the trends are likely to rise through 2012 as half the current 20 top-selling drugs get competition from generic copies, which can cost 70 percent less than their brand-name counterparts.

According to the report, the large number of generic drugs flooded the market this year (after patents expired on $16 billion worth of medicines)drove the increase in their use. In addition, low prices for generic medications offered by retailers and pharmacy chains and increased competition among companies that manufacture the treatments led to the savings. Furthermore, the report found that health insurers have encouraged members to use more generic medications.

Murray Aitken, senior vice president for health care insight at IMS Health, said, “We’re seeing the combination of pressure from large retailers to make generics available at ever-lower prices for their customers”.

In an interview with Bloomberg, Aitken said “We are seeing a very significant intensification of price competition among the generic competitors that has resulted in this significant decline in the market. We haven’t seen this in the recent past,”  

According to Bloomberg, President-elect Barack Obama says he wants to expand health- care coverage and reduce costs, partly by increasing the use of generic drugs. Obama also wishes to give Medicare, the U.S. health program for the elderly, authority it now lacks to negotiate prices with drugmakers, which Democrats in Congress say may lower prices further.

The rise in generics was stimulated by the 1984  Hatch-Waxman Act which gives the first generic-maker to copy a drug six months as the exclusive seller. The law also allowed the Food and Drug Administration (FDA) to approve generics without requiring lengthy human tests to prove safety and effectiveness.

Biologic drugs do not face generic competition because U.S. regulators have no legal authority to approve copies. Obama supports making copies of biologic medicines available, and Congress is expected to debate next year how to establish a regulatory pathway to get the products on the market.

 

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