The truth about generic drugs
By Jessica Shambora
Health care reform is front and center — and an insanely complicated issue. When someone talks about simple solutions, it’s time to listen. So we were all ears when Jacqueline Kosecoff, CEO of Prescription Solutions, came by Fortune last week and sat down with us to talk about generic drugs.
Up in New York City after a day on Capitol Hill, Kosecoff was eager to talk about how her UnitedHealth Group (UNH) unit, which is a Prescription Benefits Manager (PBM) accounting for $13 billion of UnitedHealth’s $81 billion in revenue, can save the system millions of dollars. Her claim is based on a new study, released by Prescription Solutions this week, that shows a big void in consumer understanding about generics — what they are and what savings they bring.
You may already know that generics are identical to brand-name drugs, but the study found that nearly one-third of Americans either don’t know or don’t believe that. Among people who do not take generics, only 58% say it’s because there isn’t a generic alternative available. Moreover, two-thirds of survey respondents don’t realize that brand-name drugs typically cost 50-70% more than generics.
Says Kosecoff: “Many Americans erroneously believe that the most expensive drug is always the most effective drug.”
Generics have already saved the health-care system $734 billion over the past decade, according to market researcher IMS Health. Koseocoff says that a 1% uptick in generic use equates to 1.7% savings for payers, such as employers. And consumers enrolled in its drug plans typically save $20-60 per prescription by switching.
This is why Kosecoff is pushing generics hard: She talks about a “triple win” for consumers, for payers, and for Prescriptions Solutions. If her unit delivers more value, it’s likely to get more volume and make more money. And it’s all about value these days. The study also showed stretched consumers have been cutting back on prescriptions: 27% of survey respondents said that they delayed filling, didn’t fill or didn’t take a drug in order to save money.
As the generic market grows, the biggest loser is Big pharma, whose brand-name drugs inevitably lose share. Through 2013, $134 billion in branded drugs are at risk from generic competition in eight key drug markets, according to IMS Health. Popular drugs like Pfizer’s (PFE) Lipitor, GlaxoSmithKline’s (GSK) Valtrex, and Boehringer Ingelheim’s Flomax are among the drugs with patents set to expire fairly soon.
As Kosecoff works to spur that generics market — and cut costs for Prescription Solutions’ customers — she’s pushing another item on her agenda: cheaper alternatives for biologics. These drugs, such as Amgen’s (AMGN) arthritis drug Enbrel and Abbott’s (ABBT) Humira, also for arthritis and for Crohn’s Disease, are the fastest-growing area of pharmaceuticals — a market expected to hit $90 billion this year, up from $40 billion in 2005. But generics don’t exist for biologics, which are made from living organisms rather than the small molecules of conventional pharma.
Kosecoff wants to change that. And she’s calling for Congress to help make it happen. ”A regulatory approval pathway for follow-on version of thes biologic drugs must be created,” she says.
(To read an update on the debate this Postcard ignited, click here.)
As a practicing internal medicine physician, it troubles me to see the misperceptions regarding the effectiveness of generics compared to their branded counterparts. I have been in practice 23 years and have found for the most part generic medicines approved by the FDA to be interchangeable with their branded counterparts to be equally effective and safe. There are a limited number of medications, so called “narrow therapeutic index” medications, medications for which the window of effectiveness vs toxicity is narrow, may warrant the use of branded medications due to their the limitation in dose delivery variability due to their single source, but this can also occur with some of the single source “branded” generics that have become available. Overall, I beleive most physicians recognize generic medications to be equally safe and effective and the cost effective alternative for patients who are increasingly bearing more and more of the costs of their healthcare.
I am a pharmacist and have worked in both the retail setting caring for patients and in the PBM industry trying to help make prescription drugs affordable for insurers. Reality is that we need both brand and generic drugs. I the retail setting generics worked fine for 99.9 percent of my patients. Sometimes switching to another generic manufacturer would resolve the issue, sometimes back to the brand name, but the vast majority did fine with an FDA approved generic (FDA also allows variations within branded products from batch to batch).
While working at a PBM, yes generics generally cost less and save the employer (who generally provides and pays for the majority of the health insurance), the consumer (lower out of pocket costs) and the system money and the majority of people can take without any difference in their health compared to the branded product. Why not encourage their use?
When generics were first allowed it was warned that their would be no more research and development on medications and they would put brand name pharmaceutical manufacturers out of business. That did not happen. As any company does when their environment changes they adapt and survive, follow on biologics will not change this and have the potential to save the consumer and the health care system money.
There is a place for both brand and generic drugs in the marketplace. Will generics work for everyone 100% of the time, no, but in 99.9% of the cases they will.
I am a practicing Pharmacist who regularly assists patients, Physicians in getting more value by recommending generics in addition to using drugs appropriately to maximize therapy.
Generics present great value to the consumer, health insurers and many times this decision supports patients taking or continuing on potentially life-saving drugs. I personmally taake 7 meds of which I have used consistently (6)generics for over 7 years.
Many of our patients thank us Pharmacists when we educate them on alternative generics and contact their providers. As with any drug we regularly review the appropriateness of drug dosage- including allergy’s, adverse drug reactions finding there is no difference in Brand or generic drugs in this arena.
The use of generic drugs verses branded drugs is an interesting and far more complex discussion that what cost less and who makes how much money.
Branded manufacturer often license and manufacturer products for generic distributors a category referred to as authorized generics. Also branded companies will simply change promotion to a new salt form or prodcue a new tablet form to extend patent life. Some manufacturers will even study their drug for a new indication file a New Drug Application and simply rename the product so that as the patent expires on the original product the generic product can not be used for the new indication. Wellbutrin/Xyban Prozac/Serafim are examples of this process. When it comes to quality there have been demonstrated variances beween batches in branded products as well as generic products. The bottom line do your research. One other point you should be aware of there are drug products in the market today where only a generic prodcut is available and it has been that way for years.
Talk about profits, If you want to cut healthcare costs Look at the profits being made by the PBMs like UHC. They do no research,produce no products,push contracts and paper and they make billions, more than even the manufacturers. Its time the government looked at all parts of the heathcare costs especially the fat middle man (PBMS) who are profiting by making deals to be on formulary lists with generic manufacturers to force the generics on the public. It is the same process and labor for the pharmacy to fill a brand medication vs. a generic and the PBM pays the pharmacy less when they dispense generics. The profits being made by the PBMS is astronomical. And Nobody cares to scrutinize them.
I have read through many of he comments below and I find it interesting the lack of knowledge around this topic specifically, and around healthcare in general. I feel there is a place for branded drugs as well as generic drugs. The big pharma companies are bringing innovative products that improve one’s quality of life in most cases. Do you realize that the biggest expense in our healthcare system is hospital stays? many of the products Big Pharma brings to market help to minimize hospital stays and therefore reduce overall healthcare costs. Let’s face it our healthcare system needs an overhaul. Generic products have a place in our healthcare system, but be careful what you wish for! If Big Pharma doesn’t supply us with innovative products for many of the new diseases that are becoming more and more prevalent we, the U.S., will end up with a single payer health system as is the case in Canada and many countries in Europe. Do you really want to wait a month to get the angioplasty you need or wait 6 months for hip replacement surgery. I would advise everyone to educate themselves on our healthcare system. It needs some reform, but is still the best in the world!
I do not think it is fair to say that generics are identical to branded pharmaceuticals. Generic dugs have to be 80% equivilant to the branded pharmaceuticals. Also, do you think that generic drugs might drive up the cost of branded drugs? Think about this, when a branded drug files it NDC the product has a 17 year patent life. If the drug goes through 12 years of being studied and then is approved for the market. This allows companies to market that product for the length of 5 years . This gives the company only 5 years to make back the money invested and a profit. It seems to me that knowing a generic will be in play 5 years later would drives up the price of the branded product. So in essence would the generic drugs drive up the cost of branded drugs. Also, I don’t think generic company’s develop new products all they do is copy cat what is already out there. Generic company’s do not have to develop or study the products they produce, therefore they have minimum overhead. It seems to me the more we push for generic drugs the price of branded drugs seem to soar. This happens because the market for branded products shrinks and the company’s have to charge more to get repaid for investing and to make some profit in a short period of time. The tragedy will be if the branded pharmaceutical companies pull out and do not develop new drugs! What will happen to my children and my childrens children when new diseases evolve? Generic companies do not develop new drugs. We need to be careful when we look at this issue. We cannot be one sided. My suggestion is to change the patent system for branded pharmaceutical products. My solution is make the patenet start when the drug hits the market, then the branded company has 17 year to market the product. With this change in patent protection make the companies charge less for products. The consumer wins becouse the cost is shifted to more people over a longer period of time and the companies can have more longevity to develop new drugs. I think there are some real answers to our healthcare issues, but we need to think simple.
Of course she is sponsoring the generic venue. The profit is up to 300 times the value of what they get for name brand products.
Take a look at what generics bring in VS brand name, there is no comparison. Her comments are self serving.
I am disturbed by the unscientific attacks on generic drugs. The FDA approves the drugs based upon criteria for equivalence between the generic and the brand name drug. The FDA exercises judgement based upon science when doing so. I am aware of only one major peer-reviewed study comparing brand name drugs against their generic counterparts in heart drugs (JAMA 2008). The study found that the brand name drugs were not superior to the generics. If brand name drug makers really wanted to prove that their drugs were superior, they would show it through scientific studies. Instead they use shills to report anecdotally through disease advocacy groups that the generics are substandard. Brand name drug makers spend lots of money on scientific research and development–why can’t they do the same comparing their drugs to generics? My guess is they wouldn’t like what they might find.
Great article Jessica. I still can’t stomach the jabs at the system that our elected representatives have created. If you want to give drug makers longer exclusivity, write your Congressman, pull out your wallet and pay away. Drug makers hire more lobbyists than almost anyone else in Washington, DC and each state capitol to keep the laws from changing. Especially those laws that allow spurious lawsuits against the generic drug makers to delay them from competing as long as possible. Why not? Billions are at stake and that can buy a lot of lawyers to delay a new generic from competing against a monopoly the brand drug maker has had for years. They didn’t have the best stock value before the bust last year for no reason. And who is the bigger parasite–a generic drug maker following the laws our Congress made or a brand drug maker stonewalling after losing their patent using far more lobbyists and lawyers than the meager generic industry has every put forth?
how about changing the patent laws to be similar to other countries such as Canada and Europe? Some popular drugs such as Seroquel, which can list for over $700.00 for a months supply here in the US are available as a generic in Canada for far less. I get a 3 month supply of the Canadian generic for less than I pay for 1 month in the US. The Canadian version of the FDA maintains a great website for researching the various generic manufacturers of a drug. We pay the most for our drugs in the US, while everyone else in the world benefits for far less!
Interesting problem. Big Pharma has always had the ability to squeeze out any Generic companies – by aggressively lowering brand-name prices at end-of-patent. Their economic models must say that this works — but some companies have been pushed to the brink (like when Lilly lost their Prozac patent).
On the other hand – what is the end-game here? Remove enough of Big Pharma’s revenue stream, and some day in the distant future, there might not be any new drugs to copy.
As a pharmacist, I have seen patients who can’t afford their medications and need affordable alternatives. Generic drugs provide them options that don’t brake the bank. As a consumer, I use generic drugs as do my parents and my children. I take one branded drug which isn’t available generically–when a generic becomes availabe I will change to it. I could afford to do otherwise but for me it would be a waste of money. I have yet to see a treatment failure because of generic drug use.
As a biologist, I can tell you that I will NEVER take a generic biologic product that has not had full clinical trials. And I ALWAYS take generic pharmaceutical products when there is an option.
People and governments need to be educated- biologic products are orders of magnitude more complex than small molecule drugs- the side effects, effectivess, even safety may not be the same as the original drug. (they could be either better or worse)
Don’t trust anyone who tells you otherwise. I fear we will learn this the hard way.
Jessica Shambora and the editor who allowed this ariticle to be published should be ashamed of themselves. “You may already know that generics are identical to brand-name drugs”???? Did you even do any research before writing this? Sickening that people write this sort of thing and post it on the internet. Do your homework next time Jessica but just to get you started; the FDA allows for a 20%-25% Variance in bioavailablity. “identical”? embarrassing!
When are we going to see some facts and data? Generics are not identical as the inactive ingredients may differ. When is someone going to report the truth? Not all drugs work the same for brand and generic, and we the consumers can attest to that when we feel the physical effects. So let’s get some truth in reporting and go out and ask people WHY they feel generics are not as good, ask them what drugs they are taking and how well it works, that’s data!
The basis of the article is incorrect. Generics are NOT identical to branded meds. Please do some research and you will find generics are allowed a high level of effectivness vs the branded. You do not always get the same results with generics.
It’s really a mixed bag. While generics are less expensive and tend to work just as well, they’re sometimes made to a lower standard than name brand drugs. Also, the name brand companies are the ones doing the research to find the drugs in the first place, and they only get a relatively short period of time to recoup their R&D before the generics hit the market. That behind said, the drug companies in general make a rediculous amount of money in large part due to the number of people who prefer name brand drugs and continue to purchase name brand after generics become available. As far as I’m concerned, the best plan is to take as few drugs as possible in the first place. The population of our country is way over medicated anyway.
I began my career as a pharmaceutical chemist. Without a doubt the “active ingredients” in generic and branded drugs may be the same. There are, however, important differences in the fillers, purification processes, and other additives that are bound to the medication. These may inhibit absorption or cause differences in the way a medication is metabolized. It is never an equal substitution to replace a branded medication with a generic one. Insurance companies are ignoring considerable research that speaks to the issues of generics in favor of fattening their bottom line. Not the place to put your decision-making prowess.
Ms. Kosecoff prefers generics because her company’s profit margin is exponentially greater than when branded drugs are dispensed. Do branded drugs and generics have the exact bioavailability?
After drug companies obscenely cranked up drug prices over the past 5 years, a generic drug at 30-50% price reduction is still vastly overpriced. Additionally, some drug companies have bought generic companies and then peg the generic price minimally below the brand name price (I was getting a brand name at $125 a month; when the generic came out, it was $110.). Another tactic is to make minor alterations in the brand name drug in order to extend the patent and block production of a generic drug.
Yes, generics can save money. However, the quality is often not the same as the brand name drug and the price manipulations reduce the potential savings.
There are factual flaws in the article. UH is pushing Generics because it can save money by paying less in subsidizing it for the consumer.
For one thing, while most generics have the same primary ingredients their proportion may be different or sometimes the other side ingredients are different. There is also something about the potency of the ingredients that is sometimes let us call ‘generic’ aka not the same as in a branded drug. So, all these have different effects on different patients. each patient has to figure out if the side effects with generics are same or differnet and if the effectiveness they perceive is same or different.
So generics are too generic – they dont all fall in one class. Hence talking in generic about generics is a waste of time. Only a doctor and his/her patient would be able to decide which works best. Some generics are not bad at all – like most ibuprofens. But only case by case analysis will tell whether one should prefer a particular generic over a particular branded alternative.
And what about the placebo effect!
Just remember that generic drug makers spend more on lawyers than anything else. THey are parasites. It is great to help reduce drug costs to the consumer but without big Pharma where will the next generation of drugs come from? I would argue that we would all be better off if patents lasted longer and big Pharma had more time to sell their product then maybe they could charge less and still do research.
The web is full of stories about people suffering major health problems after switching to generics. They are not “identical”. They contain the same active chemical. That does not mean the work the same way. The does, the rate at which the drugs get released and absorbed into the body, the filler compounds are NOT identical. And the biggest suppliers of generics, India and China, have same quality control issues with their sub suppliers that plague every other product from that part of the world. Remember the pet food scare last year? Then there is the outright fraud of the companies selling drugs labeled as generics and in reality they are not drugs at all. Fakes! You get what you pay for. Yes old, proven stable drugs with decades of history can move 99% of users to generics. But it is far from simple solution to our nations health care crisis. Don’t let the company who has made a fortune putting pharmacies out of business with mail order generics fool you.
The “truth” about generics that is rarely ever mentioned is that they are exclusively older drugs whose patents have expired. In some cases newer drugs that are still name brand only may have benefits that could be important to some people. In some cases they may work better, cause fewer side effects or be much more convenient to take. If cost becomes the only driver of what is best, we will eventually wind up only having old drugs and little incentive to produce anything better that must cost more for a few years.
I thought everyone preferred generics for the same reason/s as stated in the article. But it looks like the article is correct – there ARE many folks who prefer brand name rx’s and do not believe the generics are equally effective!
I disagree that generics are identical to trade products. There is something different about the formulary in a generic product. Many generics are not coated the same and if carried in a pocket will turn to powder before you need to take it. I had a very negative experience when switched to a generic from a trade for hypertension and went immediately back to the trade product and was fine. You can never convince me that generics are identical, because clearly they are not!
so who do you think is going to pay for
the R&D for new drugs????it’s not as simple as lets make generics easier to get…and look at what genzyme is going thru with a viral contamination
that shut down their entire facility
so making biologics patent dependent
isn’t as great as it sounds
Ms Kosecoff neglects to mention that the generic drug industry is a parasitic industry that could not exist without the research, invention, and development of new medications by the “Big” pharmaceutical companies. The generic drug industry does not invent — it copies; and can afford therefore to produce at lower prices.
There are also some questions about quality control of generics, especially those produced in developing countries.
Wow! Stretched consumers? I wonder! Has’t the consumer savings rate been going up fater than income growth? As they used to say: “This does not compute!” What’s the ‘real deal’ and what’s the ‘propaganda’?
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MediaCurves.com just conducted a national study with 966 viewers of a news clip highlighting the potential dangers of generic brand drugs. illustrating the dangers of texting and driving. Results showed that nearly half of viewers (46%) reported that they are less likely to purchase generic drugs after watching the video. The study also found that 66% of viewers had a more negative perception of generic brand drugs after watching the news clip. More in-depth results can be viewed at http://www.mediacurves.com/HealthCare/J7539-Generic-Drugs/Index.cfm
Thanks,
Ben