Leading America into a Healthy Future

APRIL 01, 2006
Kathleen Jaeger, GPhA president and chief executive officer

Top officials from the generic pharmaceutical industry, government, and Wall Street gathered in February at the Generic Pharmaceutical Association's (GPhA) Annual Meeting to discuss the state of the generic industry, focusing on key regulatory and business issues. Although some brand companies continue to seek to delay generic market entry through a variety of tactics, the generic sector is poised for substantial growth and is well-positioned to continue "leading America into a healthy future."

Today, ~56% of all prescriptions dispensed are generics, yet they account for only 13% of all prescription drug expenditures, according to IMS Health. And, as the federal government looks at ways to reduce health care expenditures while still providing quality care through programs such as Medicare and Medicaid, affordable generics will be a key part of those efforts.

"Generic drug manufacturers produce medications that are just as safe and effective as their brand counterparts. Part of the FDA's mission is to make sure that's the case. Yet, the prices of generics are much lower: the price of a generic drug can be as low as 20% of the price of the brand name product," said FDA Deputy Commissioner Scott Gottlieb, who spoke at the meeting.

Representative Henry Waxman (D, Calif) reiterated those cost savings: "Generic drugs have played a critical role in reducing drug prices in the United States. Over the years, the generics' share of the market has grown steadily, lowering drug prices by up to two thirds for those drugs with generic competition."

IMS Health data bear this out. According to IMS Vice President Doug Long, the generic industry grew by 21% in 2005, more than 4 times the rate of the overall pharmaceutical industry, which grew at 5.4%. Generics are expected to continue to grow due to the large number of blockbuster brand products slated to come off patent in the next few years, along with the enactment of the Medicare prescription drug benefit, increasing copays, and a rising number of health care programs promoting the use of affordable generics.

Long explained that the new Medicare benefit, in combination with Medicaid and other public health care programs, will make the federal government the nation's largest health care provider in 2006.

Increasing copays is another factor favoring generic utilization, remarked Long. And there are benefits to ensuring that medicines remain affordable: according to a recent Rand study, when a copay doubled, the use of pharmaceuticals decreased by 17% to 20%, but hospital visits increased, particularly for people with chronic diseases such as diabetes and asthma.

Continued growth, however, could be affected by the success of efforts to bring generics to market in a timely manner, a point echoed by several meeting speakers. "The best way for all of us to preserve our [health care] system, which rewards new innovations while balancing the need to pursue affordable options for patients who have limited means, is to continue to encourage rapid and fair access to generic medications after the expiration of appropriate patent protection and periods of market exclusivity," said Gottlieb.

Although the FDA has made a commitment to bringing these medicines to market, analysts at the meeting noted that funding for the Office of Generic Drugs (OGD), which reviews and approves generic medicines, as well as citizen petitions and legal challenges, could hamper the ability to bring generics to market in a timely manner.

Congress is beginning to look into the issues of citizen petitions. Recently, Senators Debbie Stabenow (D, Mich) and Trent Lott (R, Miss) introduced the "Lower Priced Drugs Act," which would take steps to tighten legal loopholes and reduce abuse of the citizen petition process. According to Merrill Lynch Vice President Gregg Gilbert, brands are becoming more aggressive in using citizen petitions as a delay tactic. Gilbert also noted that >75% of all citizen petitions analyzed by his company during a 5-year period were dismissed as having no merit.

Additionally, Rep.Waxman, Rep. JoAnn Emerson (R, Mo), and other members of Congress have pledged to look into the need to provide OGD with more resources. "We all know that the brand name companies have spent significant amounts of time and money on strategies to delay access to generic drugs," said Waxman. "We must ensure that the FDA itself does not become yet another roadblock in Americans' access to generic drugs."

Given the FDA's and Congress' stated support for generics, these challenges are not insurmountable. With the generic pharmaceutical industry on the cusp of a growth period, 2006 should mean more opportunities for Americans to save money through increased access to affordable medicines.