WHAT IT MEANS AND WHY IT'S IMPORTANT — Astrologers would say this is the Age of Pisces, while the Chinese zodiac calls it the Year of the Dragon. For health care, it might be a good time to start calling it the "Great Generic Epoch."
The trend seen in the Generic Drug Savings study, in which generic drugs count for an overwhelming majority of prescriptions written but only about one-quarter of drug spending, has been happening for some time now. But it's also accelerating, and that means a lot for drug makers and policy-makers alike.
(THE NEWS: Generics saved $1 trillion over last 10 years. For the full story, click here.)
According to a study last month by IMS Health, global spending on generics is expected to rise from $242 billion in 2011 to more than $400 billion by 2016. Much of that will come from volume growth in emerging-market countries, but a lot of it also is because of the transition to generics in developed countries like the United States, and the report noted that limited savings from expiring patents are prompting policy shifts to encourage more use of generics. And this has been going on for some time: Last year, another report by IMS found that while spending on branded drugs decreased by 0.7% in 2010, spending on branded and unbranded generics rose by 4.5% and 21.7%, respectively. That report also found that on average, more than 80% of a brand's prescription volume is replaced by generics within six months of the expiration of the branded drug's patent.
As such analysts as like IMS VP industry relations Doug Long have said before, the blockbuster model of drug development is coming to an end. While drug companies might still develop new treatments for widespread disease states, such as cholesterol and gastroesophageal reflux disease, new drugs to treat those conditions are unlikely to see the kinds of sales achieved by the likes of Pfizer's cholesterol drug Lipitor (atorvastatin), whose sales reached $7.7 billion in 2011, but lost its patent protection in November 2011. Instead, many drug companies are shifting their focus to more expensive drugs to treat disease states with smaller patient populations, including cancers and autoimmune disorders. Meanwhile, the more common conditions will be treated more and more with cheaper generic drugs.
For policy-makers, the move toward generics means drug therapies will become cheaper, which will go a long way toward making health care overall cheaper. For that reason, it behooves them and healthcare providers (ranging from physicians to pharmacists) to make sure patients know when a generic drug for their condition is available so that neither they nor their payers have to spend an arm and a leg to keep them healthy.
This is what makes the reauthorization of the Prescription Drug User Fee Act, signed by President Barack Obama last month, especially timely. One major goal of the reauthorization is to clear the backlog of about 2,500 generic drug applications currently held up at the Food and Drug Administration due to insufficient staff and resources to review them. This will help make generic drug approvals happen faster and more efficiently and ensure that generics get into the hands of patients sooner.
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