Generics saved U.S. $1 trillion in 9 years

A trillion of anything is difficult to wrap one’s head around, whether it’s the number of grains of sand on a beach or stars in the sky. It’s so much easier for the human mind to look at such a quantity as the sum of its parts rather than on the basis of its individual components.


With more than $1 trillion in savings on generic drugs, it’s important to look at what such a number comprises just to realize how important it really is. According to a study released last month by the Generic Pharmaceutical Association, that’s how much money the country saved thanks to the use of generic drugs between 2002 and 2011. That translates into $1 billion every other day, and almost $193 billion in 2011 alone.


“There’s been significant cost savings for the U.S. pharmaceutical market due to the adoption of generics,” IMS Health VP industry relations Doug Long told Drug Store News. “So that’s been good for pharmacy; it’s been good for wholesalers; it’s good for the payers. It’s rather difficult for the brands, but I think that the brands will really succeed based on innovation.”


The study, commissioned by the GPhA and conducted by IMS Health’s research division, also found that 2011 had the highest year-over-year increase in savings from generics since 1998, as savings increased 22%, compared with 2010. Savings from generics that have entered the market since 2002 have increased as well, totaling $481 billion over the decade. Nearly 80% of the 4 billion prescriptions written in 2011 were for generics, while accounting for only 27% of drug spending.


What makes the $1 trillion figure particularly significant is how it figures into national healthcare spending overall. According to the most recent National Health Expenditure Accounts report by the government, total healthcare spending reached $2.6 trillion in 2010, or $8,402 per person and about 18% of the country’s gross domestic product. The federal government financed 29% of the total, and state and local governments financed another 16%. By contrast, the federal government financed about 23% of the total in 2007. The NHEA also projected that the average growth in annual healthcare spending will hit 6.2% through 2018, even as the overall economy grows 4.1%. By that year, healthcare spending will be $4.4 billion, more than one-fifth of the country’s GDP, reaching half the country’s GDP within 15 years.


According to the report, of the total $1.07 trillion in savings, $588 billion came from generic drugs that were already on the market and had been approved by the Food and Drug Administration before 2002, while $481 billion came from newly introduced generic versions of branded drugs, which have been steadily rising over the past several years. 


In 2011, the largest percentage of savings, 57%, came from central nervous system and cardiovascular drugs, which together delivered more than $100 billion in total savings. Generics for central nervous system indications themselves grew 10% in savings in 2011 compared with 2010. Metabolism drugs reduced costs by a further $27 billion, representing 500% growth in savings since 2002. Together, the three categories accounted for almost three-fourths of savings from generic drugs in 2011. The biggest increase in year-over-year savings came from generic cancer drugs, which produced $10 in savings in 2011, compared with $3 billion in 2010.


“This is the first time the 10-year number has been more than a trillion dollars,” Long said. “2012 being a bigger generic year than 2011, you’re going to see a big jump next year.”

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