Valuable information regarding generic drugs

Prepared by the AVMA Group Health and Life Insurance Trust

One of the most effective ways to combat escalating drug costs can be the use of generic drugs. The concept is one most veterinarians are already familiar with; veterinarians around the country use generic drugs to control costs for the owners of their animal patients.

Generic drugs are usually much less expensive than brand-name drugs—generally anywhere from 30 percent to 75 percent less.

Although not every drug is currently available in a generic form, many are. Generic drugs become available when the patent on the original brand-name drug expires. In the first six months of 2004 alone, the FDA approved more than 200 generic drugs. Every month, dozens more are approved. As the number of generic drugs available on the market increases, the opportunity to reduce prescription drug costs also grows.

Although price may be an indicator of quality in other products, generic drugs can be of quality similar to their brand-name counterparts. Generic drugs must undergo a rigorous approval process by the FDA to ensure that the generic version is identical, or bioequivalent, to the brand-name drug in dosage, safety, strength, performance, quality, and use. Sometimes, the generic is even made by the same facility that manufactures the brand-name drug.

One of the reasons that generic versions may cost less is that generic manufacturers do not have the huge cost of research, development, marketing, and promotion invested by the developer of the original drug. A secondary reason is competition—when several manufacturers produce generic versions of a drug, competition can drive down the price.

The Food and Drug Administration enforces generic drug standards through legislation. Because U.S. trademark laws prohibit a generic drug from looking exactly like its brand-name counterpart, the shape, size, color, or taste of the drug—all determined by the inactive, or filler, ingredients—may be different.

Generic drugs are widely endorsed. The American Medical Association endorses generic drugs as acceptable for the American public. Hospitals routinely use generic drugs for treatment of their patients.

Nearly half of all prescription drugs now dispensed are generics. According to the Congressional Budget Office, Americans are already saving an estimated $8 billion to $10 billion each year at retail pharmacies. The Generics Pharmaceutical Association estimates every additional 1 percent increased in generic drug usage saves the country $1.16 billion annually in prescription drug costs.

Addressing prescription drug costs will continue to be an important issue in coming years, thanks, in part, to the aging baby boomer generation, and to an overall increase in drug use to treat conditions. According to a report from the National Institute for Health Care Management Research and Educational Foundation, drug expenditures will rise an average of 11.7 percent a year between 2003 and 2007. As high as that number sounds, studies indicate that without generics, the increase would be even higher.

Some physicians prescribe generics automatically, and most health plans encourage the use of generics by requiring higher co-pays for brand-name drugs. But in many cases, the responsibility falls upon consumers to ask their pharmacist or physician whether a generic is available.