In a first of its kind report, the US Food and Drug Administration (FDA) says that generic drugs approved in 2017 led to $8.8 billion in cost savings during the calendar year, and $11.8 billion in savings through February 2018.
FDA’s estimate, which is based on pharmacy acquisition costs and does not reflect rebates, discounts or off-invoice adjustments, amounts to less than one-third of a percent of total US prescription drug spending in 2017 according to a recent IQVIA report, which put the figure at $324.4 billion after discounts and rebates.
To arrive at the $8.8 and $11.8 billion figures, FDA used monthly sales volume and quantity data from IQVIA to estimate the baseline price and market for each active ingredient/dosage for which an abbreviated new drug application (ANDA) was fully approved in 2017.
In 2017, FDA’s Office of Generic Drugs (OGD) approved a record 1,027 abbreviated new drug applications (ANDAs), 843 of which were fully approved.
The total cost savings was then determined by subtracting the average price post-ANDA approval from the baseline average price, multiplied by the quantity sold for the remainder of the year for each product.
FDA’s estimates also account for multiple ANDAs for the same ingredient being approved in within the year, as is often the case, by using the average market price for that ingredient between the initial and subsequent approval to determine the additional cost savings brought on by an additional entrant.
Based on these figures, FDA estimates that the total full-year savings from generics approved in 2017 will be $16 billion, using extrapolated data to fill in for products that were not approved for a full year by the end of February 2018.
In previous years’ OGD Annual Reports
, FDA has pointed to industry estimates of cost savings for all generic drugs over the span of a decade rather than estimate the cost savings brought by approvals in a single year.
For instance, in its Annual Report for 2016, OGD cited the Generic Pharmaceutical Alliance’s (now the Association for Accessible Medicines) estimate that generics saved nearly $1.5 trillion over the prior decade.