Last year, people saved $230 billion using generic drugs

Generics made up 88% of prescriptions filled, report shows

Generic drugs have not been immune from some of the big price hikes their brand name counterparts have, but a report out Wednesday shows generic costs are still declining overall even as more are sold.

Last year, generic drugs made up 88% of prescriptions filled and 28% of total drug spending. This year, the percent of prescriptions increased to 89% while the percent of overall spending dropped to 27%, according to the report by the Generic Pharmaceutical Association.

Overall savings last year were $230 billion, the report said.

The report comes as high drug prices are a rare bipartisan issue on Capitol Hill. Democrats and Republicans joined to introduce a bill that would require drug makers to notify federal regulators if they planned to raise prices by 10% of more, among other changes. And both Democrats and Republicans on the House Oversight and Government Reform Committee grilled Mylan CEO Heather Bresch for several hours last month over the soaring prices of EpiPens.

This “heightened sensitivity” makes it important to increase access to “competitive generics,” says Chip Davis, CEO of the Generic Pharmaceutical Association.

“It’s good for the entire health care system,” he said. “Generics as much as ever before generated the savings and not the costs in the system.”

Generic drugs offered the biggest savings last year for mental health ($34 billion), followed by hypertension ($26 billion) and cholesterol ($25 billion).

The industry trade group, not surprisingly, focused on the biggest savers. But it isn’t alone in highlighting the benefits of generic drugs. The Government Accountability Office reported this year that generic drug prices dropped 59% from the first quarter of 2010 through the sec- ond quarter of last year for the Medicare Part D prescription drug program.

Still, generic drug price hikes became big news late last year and several drugs have had large increases this year as well.

Barclays Equity Research reported last week that a small number of generic drugs drive most of the price inflation. The anti-inflammatory and pain drug Naproxen Sodium; antipsychotic medication Aripiprazole, and ulcer and acid reflux drug Esomeprazole Magnesium are consistently on top of the list of those with large price increases. Naproxen Sodium, for example, was up more than an average of 1100% last month alone.

Percentage price increases for a drug that costs just pennies a pill shouldn’t be compared with increases for specialty drugs that can cost $100,000 a year.

“Generic drugs often offer an incredible savings opportunity for payers and consumers when compared to their brand name counterparts,” says Michael Rea, CEO of Rx Savings Solutions, which represents insurers. “However, sophisticated pricing mechanisms on generics can mean health plans, employers and consumers are actually overpaying when they believe they’re getting a good deal.”

Linda Cahn, president of Pharmacy Benefit Consultants, agrees, noting that while some generic prices are “remarkably low,” and decrease even more over time, many increase and “sometimes astronomically.”

Businesses and unions “need to monitor all drug costs ... continuously,” says Cahn.