On October 17, 2017, the Senate Health, Education, Labor and Pensions Committee, under the leadership of Senators Lamar Alexander (R-TN) and Patty Murray (D-WA), convened a hearing to explore why drug prices are so high. The committee asked trade associations representing different parts of the prescription drug supply chain – manufacturers, wholesalers, pharmacy benefits managers and pharmacists – to help it understand what can be done to provide some relief for the millions of Americans burdened by skyrocketing prescription drug costs.
Chip Davis, president and CEO of AAM, used the opportunity to explain how safe and affordable generic and biosimilar medicines are a solution to this challenge – and how to ensure they continue to be.
Opening Remarks from AAM CEO Chip Davis
Davis provided the committee with an understanding of both the scope of generic savings for patients and how the generic business model is different from that of branded drugs.
- Generic medicines represent greater than 89 percent of all prescriptions dispensed in the U.S., but only 26 percent of expenditures on prescription drugs, saving patients and payers nearly $5 billion every week. Brand drugs, on the other hand, represent 11 percent of the prescription drug market but account for 74 percent of costs.
- How are those tremendous generic savings generated? Generics operate in a deflationary market, not an inflationary market, like branded drugs. Brands are able to keep increasing their prices because they are generally monopolies, while generics are more like commodities. Hyper-competition among generic drug makers, along with a limited number of buyers (in the case of generics there are three wholesalers who control 90 percent of the market), force down prices.
Patients Benefit from Increased Access to Generics and Biosimilars
To ensure the long-term sustainability of generic and biosimilar drug makers so Americans can continue to benefit from savings and access, Davis encouraged the Senate to consider policies that: (1) recognize the challenges a deflationary and imbalanced market creates for these businesses; (2) put an end to anti-competitive practices by branded companies and (3) equally favor access and innovation. Understanding the difference between the two sectors of prescription drug manufacturing is critical if we are to sustain the savings provided by generics. To this end, Davis made the case for congressional action to pass the bipartisan CREATES Act, repeal the misguided Medicaid Generics Penalty and advance policies to increase the use of biosimilars within Medicare.
By Allen Goldberg, AAM Vice President, Communications