Generics will make drugs cheaper: What does that mean for consumers?

Filed Under: Costs, Patients

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Some of the most popular drugs on the market will soon have generic alternatives, which can save consumers thousands of dollars each year. We spoke to Dr. Julie Marie Donohue, associate professor of health policy and management at the University of Pittsburgh, to get some of the details about how that might impact cost, and consumers. 
Stats from DailyFinance

 

Within the next two years patents on some of the world’s best-selling drugs will expire, opening the door for generic drug makers to manufacture their own versions of the medication, sold for a fraction of the price. This will likely mean cheaper drugs for millions of people.

“It’s a huge deal, even for patients covered by insurance,” said Donohue.

Some stats:

  • Generic drugs run about 80 to 85 percent cheaper than brand-names, according to a 2009 study IMS Health
  • They accounted for about 75 percent of prescriptions dispensed in the U.S., up from 57 percent in 2004.
  • A generic captures 90 to 90 percent of the market for a drug when it hits pharmacies, Donohue said.

 

This isn’t entirely organic. Laws allow pharmacies to fill prescriptions for drugs like Lipitor with a generic, when it becomes available. They have an incentive–filling with generics rather than brands tends to drive up pharmacies’ profit.Insurers too favor generics.

“A lot of health plans simply won’t cover the branded version when there is a generic available,” Donohue explains. Those that do often charge increasingly higher co-pays for the brands. “There used to be a $5 difference. Now it’s more like a $15, $20, $50 difference,” she said. This can lead people to even switch to a slightly different drug when it goes generic to treat a condition, rather than stay on a brand, Donohue said.

When patents expire on blockbuster drugs like Lipitor and Zyprexa, several companies will probably  want to get in the game. For the first 180 days, only one company–the one that challenged the patent–can make the drug. With that market cornered, the price often drops to anywhere between 30 and 50 percent of the brand. But once other makers can get in on the game, prices can plummet to somewhere between 5 and 10 percent of the cost of the brand.

The more popular the drug, the more consumers are likely to benefit when the patent runs out.

This sounds great, and often, it is. But in our next post, we’ll talk about some of the problems facing the generic marketplace.
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