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.”
PDUFA, GDUFA make 2012 milestone year
2012 is turning out to be a pretty important year for generic drugs, important enough that some of the things happening over the past several months have begged comparison to 1984, probably the biggest milestone year for the industry.
In July, Congress passed, and President Barack Obama signed, the Prescription Drug User Fee Act, which included the Generic Drug User Fee Amendments, known respectively as PDUFA and GDUFA. Following the signing, Generic Pharmaceutical Association president and CEO Ralph Neas called it “the most important pharmaceutical legislation since the 1984 Hatch-Waxman Act,” referring to the law that created an abbreviated regulatory approval pathway for generic pharmaceutical drugs.
The amendments create a system of user fees that generic drug companies will pay to the Food and Drug Administration when they apply for approval of a drug. These fees are projected to raise about $299 million per year over five years. That money will go toward hiring extra staff who will help clear the FDA’s estimated backlog of 2,500 generic drug approval applications awaiting review. Many of those applications are for drugs for which multiple versions already exist, as opposed to entirely new generic versions of branded drugs.
The wave of major branded drugs losing patent protection has continued as well. Pfizer’s cholesterol drug Lipitor (atorvastatin calcium) was the most noteworthy example, having gone generic in November 2011 with the introduction of Ranbaxy Labs’ generic version; Ranbaxy’s own 180-day period of market exclusivity, which it received as the first company to successfully file for FDA approval of a generic version of the drug, ended in May of this year, allowing other generic companies to make their own versions. Other major drugs facing patent expiry this year have been Bristol-Myers Squibb’s and Sanofi’s blood-thinning drug Plavix (clopidogrel), AstraZeneca’s psychiatric drug Seroquel (quetiapine), Merck’s respiratory drug Singulair (montelukast) and Takeda’s Type 2 diabetes drug Actos (pioglitazone).
“Right now, there’s plentiful generic opportunities,” IMS Health VP industry relations Doug Long told Drug Store News. “It’s almost a who’s-who list of patent expiries.”
In addition to generic drug makers themselves, retail pharmacies plan to benefit as well. “They generally make more margin for a generic product than they do for a branded product, particularly during the exclusivity period,” Long said.
Wasson rewind: Advancement of pharmacy by the numbers
There was something that jumped out at me during the one-hour interview with Walgreens president and CEO Greg Wasson that helped set the tone for the massive, 86-page exclusive report on the company that appears in this issue. It had to do with Wasson’s vision for the role of community pharmacy in the future of health care.
“I want to be clear, I mean community pharmacy — not community pharmacists,” he said. “Because community pharmacy encompasses not only the role of pharmacists within the store, but for many of us that are co-locating nurse practitioners and physician assistants, and in some cases physicians, in their stores, it means expanding the scope of services a community pharmacy can provide, and expanding that even further.”
There are signs that the future is already upon us. The state of Massachusetts, which in many ways has been the learning lab for health reform, in August passed a new cost-containment law that aims to reduce health spending in the state by some $200 billion over the next 15 years. Among other key measures, the new law expands the services that can be provided in a Massachusetts retail clinic to the full scope of practice for a nurse practitioner, including diagnosis and treatment, management and monitoring of acute and chronic disease, and wellness and preventive services.
When you do that, basically 80% of all primary care can be provided in a community pharmacy setting. According to 61% of DrugStoreNews.com users who participated in a late August/early September reader poll, the new law will likely be a model for other states that will look for the best ways to lower costs and expand access to care.
There are other signs that the future is already here. Take, for instance, the Centers for Medicare and Medicaid Services’ interest in partnering with Walgreens, CVS, Walmart, Sam’s Club and Thrifty White, among others, to drive better awareness for the free annual wellness visits Medicare recipients became eligible to receive in 2010. Only 6% of seniors actually took CMS up on the offer in the first year.
And even prior to this, seniors had emerged as a growing segment of the retail clinic patient population. According to the highly popular Rand study, which is being featured in the September 2012 edition of Health Affairs — seniors made up almost 15% of retail clinic patients between 2007 and 2009, up from 7.5% in the period from 2000 to 2006. Indeed, the findings are based on 3-year-old data in a sector of health care that is changing dramatically every day
There had been a 102% increase in clinic visits in each of those years.
You can expect those numbers to climb even higher in the years ahead. Wasson certainly does.
Rob Eder is the editor in chief of The Drug Store News Group, publishers of Drug Store News, DSN Collaborative Care, and Specialty Pharmacy magazines. You can contact him at [email protected].