More Generic Drugs – More Savings

 

Here’s some good news for a change – Americans are saving money on drugs. The Trump Administration has saved Americans $26 Billion over the last 20 months.

The reason is more approval of generic drugs. In the last 20 months the Trump FDA, under the leadership of Commissioner Scott Gottlieb, has approved an astounding 1,617 generic drugs. These generic drugs are identical to branded versions but sold at commodity prices after patents expire. That’s an incredible 81 generic drugs approved every month on average – a 17% increase over the preceding 20 months.

The Wall Street Journal says the Council on Economic Advisers has calculated the savings from these new generics at $26 Billion. Dr. Gottlieb deserves the credit for this incredible performance. He has put a priority on clearing out an application backlog, raising the priority on drugs where competition is limited, and more. The market for generics can respond to policy changes with some speed because copying a drug is much less onerous than new drug discovery and approval.

America takes a lot of flack for high drug prices but the American generics system is the envy of the world. Nine in 10 prescriptions in the U.S. are cheaper generics, which saved $265 Billion last year. Compare that with 70% generics in Canada and less than half in many European countries.

The U.S. drug industry carries the load for the world when it comes to R & D on developing new drugs. These new drugs are expensive while under patent protection. But eventually prices fall as competition arrives when patents expire. Europe enjoys less price discipline.

The White House notes that “as of August 2018 the relative price of prescription drugs was lower than in December 2016,” which is a dose of reality to anecdotes about skyrocketing costs. Important, too, is the point that patients also “save” from expensive new therapies in the form of extended and improved lives. Affordability is an issue only if a drug exists.

WSJ says no past Administration can boast this record of lowering prices without disrupting medical innovation. Yet President Trump is threatening to blow up this progress with his fixation on importing European price controls. (Trump’s Radical Plan to Lower Medicare Drug Prices)

WSJ concludes, “Naturally, Democrats want to set up a “price gouging” agency that would have roving authority to investigate and fine drug companies that are behaving in ways Democrats don’t like. Their model is the Consumer Financial Protection Bureau. Then again, Mr. Trump has rolled out his own demagoguery at pharma executives. The Administration’s record reveals that the better treatment is more competition.”

As I write this on Thanksgiving weekend, I am thankful for Dr. Gottlieb and his agency’s efforts to increase the number of approved generic drugs and the resulting savings for all Americans.

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