Celebrating 25 Years of Savings and Looking Ahead

Pharmacy TimesOctober 2009
Volume 75
Issue 10

Kathleen Jaeger

From town halls to 24-hour cable news to congressional hearings and speeches by President Barack Obama, we have been saturated with wall-to-wall information about health care reform. As this issue continues to be debated, the one fact that hasn’t been discussed much, but is indisputable, is that for 25 years generic pharmaceuticals have been contributing billions of dollars in prescription drug savings. As Congress grapples with increasing access to quality care while also cutting costs, clearly one solution is expanding access to generics.

On September 24, 1984, the Drug Price Competition and Patent Term Restoration Act was signed into law by President Ronald Reagan. Commonly called the Hatch-Waxman Act, this landmark legislation created the modern generic pharmaceutical industry.

Twenty-five years ago, I am not sure that President Reagan, Senator Orrin Hatch, or Representative Henry Waxman could have envisioned the lasting magnitude of the Hatch- Waxman Act. Today, generic medicines represent 72% of the total prescriptions dispensed in the United States, but only 17% of all dollars spent on prescription drugs.

Affordable, Safe Medicines

Even more amazing is the savings that generic medicines are bringing to the American health care system. One billion dollars is saved every 3 days by using generics. That’s extraordinary savings—far more than anyone predicted or could have even imagined 25 years ago, when experts estimated that generic competition would create $1 billion in savings in the first decade.

It is a testament to our industry’s strong record of producing safe and effective medicines at affordable prices. And it is also a testament to the confidence that consumers have placed in our products. They know that when they take generic medicines, they are getting the same drugs, delivering the same benefits as brand name drugs, but at much lower costs.

Greater Access Needed

At the recent GPhA Annual Policy Conference held in mid-September, leaders of the Obama administration and the architects of the Hatch- Waxman Act reflected on the success of this legislation, and the contribution of the generic industry.

Health and Human Services Secretary Kathleen Sebelius told the attendees, “I have been actively working on the promotion and expansion of access to generic drugs for sometime, both in my role in Kansas and continuing on at the Department of Health and Human Services. I think that it’s appropriate this year that as we look at what’s pending in Congress on health reform that we are also celebrating the quarter-century anniversary of the Hatch- Waxman Act, which really began to transform the pharmaceutical industry and made generic drugs much more widely available to Americans.

“We still have a huge problem with access to affordable medicines for way too many Americans. The current battle which is under way is with follow-on biologics. I just want to tell you at the outset that you have allies in the President of the United States and in our department because we very strongly believe that this initiative needs to move forward and give everyone access to these critical new drugs.”

Senator Hatch, the chief Senate architect of Hatch-Waxman, told the audience that Hatch-Waxman was the outcome of bipartisan compromise, and called for such compromise as health care reform progresses.

“In the end, we passed a bill that has not only worked well, but has saved consumers and state and federal governments billions of dollars. So, perhaps it’s not too late for Congress to benefit from that important lesson as we reconsider health care reform. Maybe Henry [Waxman] and I can pull off another miracle. This time, I’d even be willing to call it the Waxman-Hatch Act.”

Congressman Waxman summed up the role of the generic industry and its ongoing and growing contribution. “When Senator Hatch and I developed the legislation 25 years ago to produce generic drugs… we thought that the result of this law would save perhaps a billion dollars…. But the reality has been that in the last decade alone, generic drugs have saved consumers and businesses and state and federal governments $734 billion. Making sure that Americans have access to, and can afford, life-saving medicines has been one of my chief goals as a member of Congress. And I’m proud of the success of generic competition and of the generic industry in helping to achieve that goal. But there’s still much to do to increase savings for generic drugs….”

Yes, there is much to do in shaping health care reform in a way that will increase access, while simultaneously reducing costs for patients. The generic pharmaceutical industry is fully prepared to continue our contribution to savings and improved health for all Americans.

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