Pharmaceutical companies only hold the patent to a drug for so long and when it expires, a generic version can be made. Generic drugs cost much less than brand names despite doing the same job and over the years, according to a recent study, consumers have saved $1 trillion using them.
Huge savings possible thanks to 1984 law
In 1984, Congress passed a law called the Hatch Waxman Act, which put a statute of limitations on drug patents, according to the Huffington Post. Essentially, the law means that a drug company has a window when they are the sole proprietors of a particular drug and get to reap all the profits. However, once the window closes, generic drug companies copy the drug and sell a cheaper version that does the exact same thing, for less money.
According to the Food and Drug Administration, about 8 out of every 10 prescriptions filled today in the United States is for a generic drug. They are 80 to 85 percent cheaper on average than brand name and in 2010, using generics saved Americans $158 billion, almost $3 billion per week.
One trillion in savings over past decade
A recently released study by the Generic Pharmaceutical Association asserts that in the past decade, generic drugs have saved consumers more than $1 trillion, according to the Huffington Post. Last year, according to MarketWatch, there was a 22 percent increase in generic prescriptions in 2010.
Though nearly 80 percent of the 4 billion prescriptions filled every year are generic drugs, they account for only 27 percent of all spending by consumers on them. About 57 percent of those savings come from heart medication, anti-convulsant and anti-depressants, according to the Huffington Post. Generic retroviral drugs, according to NPR, have cut the cost of AIDS medications by about two-thirds, from more than $1100 to $335 per year, about the size of the average payday loan.
Some of the biggest money-making drugs of all time have or are due to “go off-patent” in the near future. For instance, Lipitor, formerly one of the most profitable drugs ever invented, is now available for pennies on the dollar in generic form. Plavix, a blood thinner, Effexor XR, an anti-depressant, and Foxamax, an osteoporosis medication, are other examples of huge money makers that have gone generic recently.
The savings come from the fact that generic drug companies don’t have to spend billions of dollars and years in development to create the drugs. Aside from the savings posed to people here, there are some other benefits that are perhaps a bit more humanitarian in scope.
Generics, by virtue of being cheaper, also can be distributed to very needy people. For instance, according to Reuters, the government of India recently allocated the equivalent of $5.4 billion to provide generic drugs to poor people, who typically don’t get much in the way of health care, as 40 percent of that country live below the poverty line. Currently, government programs extend free drugs to less than 25 percent of the population. The new program will get free drugs to 52 percent of India’s population by 2017.