Regulatory Focus™ > News Articles > GPhA: 505(j) Provisions Saved US $1 Trillion Since 2002

GPhA: 505(j) Provisions Saved US $1 Trillion Since 2002

Posted 06 August 2012 | By Alexander Gaffney, RAC 

Abbreviated new drug applications-also known as generic drug applications or 505(j) applications-have saved US citizens more than a trillion dollars in the past decade, says a new report out from the health data analytics firm IMS Health and sponsored by the Generic Pharmaceutical Association (GPhA).

The report, "Savings: $1 Trillion Over 10 Years," comes as healthcare costs continue to rise, outpacing inflation on a consistent basis. Generic medicines, says the report, have been a crucial component in preventing those costs from rising even further.

"Generic drug use has saved the U.S. health care system approximately $1.07 trillion over the past decade (2002 through 2011) with $192.8 billion in savings achieved in 2011 alone," the report explains.

Potential Savings to Accelerate

Because of the impending retirement of the baby boomer generation, these savings are likely to accelerate as more people enroll in Medicare and use prescription medications, particularly for chronic conditions.

The potential for savings in this area is enormous, the study remarks. "[The Congressional Research Organization noted] that Medicare spent more in 2009 on just one biologic drug (Epogen) than the entire US Food and Drug Administration budget for that year, including all food, drug and cosmetic programs."

Savings from generic medications have also increased, jumping 22% between 2010 and 2011, with Americans saving on average more than half a billion dollars every day of the year ($192.8 billion in 2011). Medications that have entered the market during the last 10 years accounted for nearly half of the total savings, with $481 billion since 2002. IMS Health noted this number is likely to accelerate "exponentially" as additional high-grossing drugs lose patent protection.

The report's authors also noted the realized savings from generic medications have vastly outpaced those originally forecast at the time of the passage of The Hatch-Waxman Act, more formally known as the Drug Price Competition and Patent Term Restoration Act of 1984. At the time, congressional researchers believed the Act would save just $1 billion over the coming decade. Instead, it wound up saving between eight and 10 times that amount.

Savings from generics have also increased every year, from $60 billion a year in 2002 to $193 billion in 2012, amounting to a compound annual growth rate of almost 12.4%.

Branded Manufacturers: No Copies without Innovators

Advocates from branded manufacturers, including the Pharmaceutical Research and Manufacturers of America (PhRMA), were quick to comment on the report.

"Such savings are possible because innovator biopharmaceutical research companies - the most research-intensive sector in the US economy - produce medical advances through pioneering scientific work and long-term, expensive investments," PhRMA wrote. "Without the development of new medicines by innovator companies, there would be neither the new medicines essential to progress against diseases nor generic copies."

PhRMA also said previous research, also by IMS Health, pegged advances in the cost of medications to just 0.5% in 2011, and has projected between zero and 3% increases through 2015.

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