Demand for generics remains strong, fueling steady growth in market share
Like a powerful tide that gradually eats away at the foundations of a once-impregnable sea wall, the booming market for generic drugs advances and recedes with the rise and fall in the number of branded drug patent expirations each year. But their long-term growth momentum remains on course, making generics an implacable force chipping away at what’s left of the market domain held by traditionally derived, broadly focused blockbuster drugs.
The steady advance of me-too medicines continues, even in the face of year-over-year declines in the number of branded-drug patent expirations since the peak of the “patent cliff” that hit Big Pharma in 2012 to 2013. “Blockbusters worth $35 billion [in annual sales] lost their patents in 2012 — the high point of the patent cliff,” noted CVS Health in a CVS Insights market trends report.
Since then, generics have maintained their upward march, impelled by cost-saving pressures among public and private health plan payers and patients, post-patent market competition, brand-to-generic substitution incentives by payers, and the continuing impact of expiring patents on traditional blockbuster medicines facing copycat competition for the first time.
In 2014, the most recent year for which full-year figures are available, “patent expiry events resulted in a reduction in spending of $11.9 billion ... mostly from the impact of the loss of exclusivity for Cymbalta in 2013 and Celebrex in 2014,” IMS Health reported. “Despite the lower level of expiry impact, the share of prescriptions dispensed as generics increased by 2% to 88% in 2014.”
That rise in market share will continue — albeit at a more modest pace than in the go-go years of the past decade. “Generics will continue to dominate prescription drug usage in the United States, rising from 88% to 91% to 92% of all prescriptions dispensed by 2020,” noted Murray Aitken, executive director of the IMS Institute for Healthcare Informatics.
“Spending growth in the next five years will differ from the last four, which included the largest patent expiry cluster ever in 2012 and the largest year for new medicines in 2014,” Aitken reported. “The impact of patent expiries over the next five years, while higher in absolute dollars, will be lower in percentage contribution than the past five years — and no single year will reach the level of 2012.”
Older patients with chronic conditions that can be treated with post-patent multisource medicines are keeping the generic growth engine humming, said Doug Long, VP industry relations at IMS. “The primary drivers of the [prescription growth] forecast reside in older patients with chronic conditions treated with generic medications,” he reported. Indeed, 70% of all generic prescriptions dispensed in the United States “are for chronic conditions,” Long said, “and 65% are filled by patients 50 years old and older. This accounts for more than 41% of all prescriptions.”
Overall, the IMS Institute reported, “U.S. spending on medicines will reach $560 billion to $590 billion in 2020, a 34% increase in spending over 2015 on an invoice price basis. This growth will be driven by innovation, invoice price increases (offset by off-invoice discounts and rebates) and the impact of loss of exclusivity.”
Not to be overlooked in the steady rise of generics is the role played by pharmacy benefit managers and health plan payers. CVS Health’s Caremark PBM, for instance, makes “continuous efforts to encourage plan members to use generic drugs when they are available,” according to the company.
“We believe our generic dispensing rates will continue to increase in future periods, albeit, at a slower pace,” CVS Health reported. “This increase will be affected by, among other things, the number of new generic drug introductions and our success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.”
Over the past decade, the generic juggernaut — accompanied by the ascendancy of specialized and highly targeted large molecule biotech medicines — has upended the traditional market for branded pharmaceuticals and shifted the balance of power. “As a result of patent expirations, generic competition and a withering pipeline of broad-reaching drugs, manufacturers are shifting their drug discovery, development and pricing strategies,” said pharmacy benefit management giant Express Scripts in its most recent Drug Trend Report. “Now, manufacturers are increasing their focus on medications that treat small subsets of patients with diseases like cancer, or patients with rare diseases such as hereditary angioedema.”
“Manufacturers also are tailoring molecular drugs to patients with specific genetic profiles known to be affected by certain diseases, so the drugs are more effective in treating those specific patients,” Express Scripts reported.
Trumpeting the cost savings
It goes without saying that the primary engine driving the rise in generics’ market share is the price differential between branded and copycat medicines. Savings from generics reached an all-time high in 2014, according to the seventh annual “Generic Drug Savings in the United States” report, compiled on behalf of the Generic Pharmaceutical Association by the IMS Institute for Healthcare Informatics.
“The 2015 report shows that generic drugs are an essential part of any solution to sustaining our health system and are central to efforts that increase patient access and generate savings for patients, taxpayers, employers, payers, providers and others,” said GPhA president and CEO Chip Davis. “Nearly 3.8 billion of the total 4.3 billion prescriptions dispensed in the United States in 2014 were filled using generic drugs. Yet generic prescriptions account for only 28% of total drug spending.”
In 2014, “generic drugs were responsible for $254 billion in health system savings ... bringing the total savings over the last 10 years to $1.68 trillion,” GPhA reported. What’s more, the industry group reported, “newer generic drugs introduced within the last 10 years are making significant impacts on patient and health system savings.”
Newer generics make up 57% of savings, according to GPhA. “These newer generic drugs also saved the health system $638 billion of the most recent decade’s $1.68 trillion,” said Davis. “Older generics generated upward of $100 billion in health system savings in 2014 and $1.05 trillion in savings in the last 10 years.”
The biggest cost-saving impact, said an industry report, is “in therapy areas that address mental health conditions ($38.0 billion), treat hypertension ($27.9 billion), or help manage or lower cholesterol levels ($26.8 billion). Rounding out the top 10, therapy area savings are accrued in pain medicines ($22.8 billion), anti-ulcerants ($19.2 billion), nervous system disorders ($15.6 billion), anti-nauseants for cancer ($11.6 billion), anti-bacterials ($11.3 billion), other central nervous system disorders ($9.4 billion) and attention deficit hyperactivity therapies ($8.2 billion).”
The crucial role that these cost savings play in areas like improving patient medication adherhence can hardly be overstated. “Patients’ rising exposure to costs, when not using generics, puts them at risk for worse adherence,” said Long of