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The Leaflet: Generics Save Lives and Money

September 7, 2018

Billions of dollars annually are spent on prescription medicines. The use of generic and biosimilar drugs in lieu of brand-name drugs can dramatically decrease prescription drug prices.

In 2016, health expenditures in the United States totaled $3.3 trillion, according to the Centers for Medicare and Medicaid Services. Ten percent of this colossal amount was spent on prescription drugs. Fortunately, generic and biosimilar drugs can dramatically decrease the billions annually spent on prescription drugs.

A recent Association for Accessible Medicines (AAM) report reveals the use of generics and biosimilars in lieu of brand-name drugs reduces prescription drug prices by increasing marketplace competition, which drives down the costs of existing drugs and expands access to safe and effective medicines.

As out-of-pocket health care spending continues to rise, any measure to reduce health care costs would be a boon to patients. In 2017, consumers purchased generic drugs 97 percent of the time when both brand and generic versions were available. Patients who chose generics saved approximately $265 billion last year. Medicare and Medicaid also experienced savings of $82.7 billion and $40.6 billion, respectively, which translates to an average savings of $1,952 per Medicare enrollee and $568 per Medicaid enrollee. Over the last ten years, savings from generic drugs in the United States has increased 172 percent.

Consumers’ preference for generic drugs is not a surprise given that 93 percent of generic prescriptions are filled at $20 or less and the average copay for generic drugs is $6.06, compared to a copay of $40.30 for brand-name versions. Overall, the shift to generics and biosimilars has saved consumers nearly two trillion dollars over the last decade. States benefit, too. In 2017, states saved $5.2 billion on average by using generic prescription drugs. Statewide savings ranged from $354 million in Alaska to a high of $23.4 billion in California.

AAM exposes three factors that jeopardize patient access to generic and biosimilar medicines: market imbalances, anti-competitive tactics, and misguided government policies.

In a new Research & Commentary, Heartland Senior Policy Analyst Matthew Glans notes the drug-approval pipeline is artificially clogged with government mandates, which threatens access to life-saving generic drugs.

“Government regulations increase the time and cost of drug development. In a 2016 study, the Pioneer Institute found the drug development process typically takes 15 years to complete, a significant increase from a few decades ago … The study also found the cost of development averaged $2.6 billion in 2014,” wrote Glans.

Glans contends lawmakers should focus on consumer-friendly reforms and refrain from enacting policies that distort the prescription drug market.

“Although drug prices have skyrocketed, creating price controls—as some lawmakers have suggested—is not the answer. Commonsense reforms can bring down drug prices by streamlining the approval process for both new and generic drugs,” wrote Glans.

 

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Author
Arianna Wilkerson works in government relations at The Heartland Institute.
awilkerson@heartland.org