Generic drugs drive savings, not costs

As Congress continues its focus on prescription drug prices, it is important to make sure the facts are aired and the discussion remains constructive. For the benefit of millions of patients, it is our hope that policymakers focus on efforts that boost pharmaceutical competition and support access to more affordable generic medicines. As a January 2016 Department of Health and Human Services (HHS) ASPE issue brief, Understanding Recent Trends in Generic Drug Prices, says, “Our review of evidence strongly supports the conclusion that generic drug prices are not an important part of the drug cost problem facing the nation.”

Use of generic drugs leads to substantial cost savings for patients and the health care system. This is reflected in the fact that 88 percent of dispensed prescriptions are for generic drugs, yet they account for only 28 percent of total drug spending. Generics saved the U.S. health system $254 billion in 2014, according to the Generic Drug Savings in the U.S. report compiled by IMS Health on behalf of the Generic Pharmaceutical Association (GPhA).

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The HHS issue brief also said, “Decreases in generic drug prices have partially offset large increases in prices for brand drugs.” With this in mind, Congress should avoid crafting measures detrimental to the entire universe of more than 14,000 generic drugs — a large majority of which continue to decline in cost — in their efforts to address individual outlier company pricing decisions. 

The brief also states that nearly 65 percent of Medicaid generic prescriptions experienced cost decreases. This calls into question why Congress would implement in October 2015 an additional rebate on generics, which many on the Hill referred to as the “Turing provision.” However, Turing is not a generic drug company. Turing is a brand drug company and Daraprim is an off-patent brand drug, which currently has no approved competition.

This provision won’t limit brand companies like Turing from raising prices. But, it will add significantly to generic manufacturers’ costs, making it much harder to produce generics across many therapeutic classes. This will reduce generic competitors on the market, increase vulnerable beneficiaries’ reliance on more expensive branded products, and cause Medicaid budgets to soar - the exact opposite of what millions of patients need. The 2014 Medicaid savings from generics reached $33 billion and these savings are now at risk. This provision should be immediately repealed.

Congress and others must exercise some caution to avoid upending our health system. Ignoring the market realities to instead paint a small number of price increases as an industry trend is a decision that poses real risk, not only to the generic drug industry but to the millions of people who rely on generics for safe and more affordable medicines.

Competition among generic manufacturers, not price or rebate regulations, will allow the most cost-effective and reliable generic pharmaceutical marketplace in the world to thrive.

It’s well past time to set the record straight: generic drugs drive savings, not costs.

The 2014 Express Scripts Drug Trend Report showed that since 2008, the overall price of generic drugs has been cut roughly in half. Drug Channels blog reported that in the second quarter of 2015 almost half – 44 percent – of all generic drugs experienced a decline in cost and many others had either no increase or only a modest increase in cost. Thirty of the 50 most common generics declined in price from January to December 2015, according to the website GoodRx.  The aforementioned HHS analysis also showed that about two-thirds of generic products appear to have experienced price declines in 2014.

This is not to say the market is immune to natural fluctuations. What everyone should be concerned about is putting in place regulations that hamper development or hinder access. Policymakers instead have the opportunity to support numerous solutions that would boost generic competition to bring about even more savings.

A bipartisan bill, the Fair Access to Safe and Timely (FAST) Generics Act, would generate $2.4 billion in savings, according to the Congressional Budget Office. It would also take important steps to prevent the misuse of Risk Evaluation and Mitigation Strategies (REMS), FDA patient safety programs being used by some brand companies to block generic competition.

Congress can ensure a fully resourced Food and Drug Administration (FDA) is equipped to address the backlog of more than 3,800 generic drug applications stalled while waiting for approval and shorten FDA median generic drug approval timelines, which, at the industry’s best estimate, currently stand at a staggering 48 months. This contrasts starkly with the brand drug industry which has a median approval time of 12 months and an expedited priority review of about 6 months.

Innovation must be coupled with affordability in order to ensure access. Congress can consider measures that accelerate market entry and uptake. For example, utilization of generics among low-income subsidy Medicare beneficiaries is below the national average. Congress can help address this by supporting lower generic co-pays for Medicare recipients. Increasing generic utilization among the low-income Medicare population could save up to $17.7 billion over 10 years, according to the Congressional Budget Office.

And, we can all work closely to ensure that the framework for biosimilars, safe and effective alternatives to costly brand biologic drugs, expands and expedites patient access, creating a market primed to save anywhere from $44 billion to $250 billion.

By all accounts, health spending is on an unsustainable path. Generic drugs create the savings today that allow investments in tomorrow’s innovation. Ensuring access to more affordable medicine is an effort vital to our health system that everyone should support.  

Davis is the president and CEO of the Generic Pharmaceutical Association.

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