You might think that lower cost means lower quality, but that's not the case with prescription drugs, says Gary Buehler, R.Ph., director of the Food and Drug Administration's Office of Generic Drugs. "The FDA ensures a rigorous review of all drugs, and consumers can be assured that generic drugs are as safe and effective as brand-name drug products," he says.
Generic drugs are copies of brand-name drugs and are available in both over-the-counter (OTC) and prescription form. For example, ibuprofen is the generic version of the OTC pain medicine Advil. Last year, the FDA approved the first generic of the prescription diabetes drug Glucophage (metformin). Generics have the same quality, safety, and strength as branded medicines. But for an average brand-name drug that costs $72, the generic version costs about $17.
At roughly one-third the price of brand-name medications, generics can bring consumers significant savings. A 2002 study by the Schneider Institute for Health Policy at Brandeis University in Waltham, Mass., concluded that if Medicare increased the rate of generic usage to that of similar high-performing private sector plans, its 40 million beneficiaries could see potential savings of $14 billion in 2003.
Because generic drugs play a key role in making health care more affordable, FDA Commissioner Mark B. McClellan, M.D., Ph.D., has made it a priority to encourage their availability. FDA experts say there is no question that brand-name drugs are also essential.
"Generic drugs are possible only as a result of the development of new innovative drugs, and this innovation requires significant investment," McClellan says. "Without fair compensation from meaningful patent protection, drug research and development would slow or stop." According to the Boston-based Tufts Center for the Study of Drug Development, the cost to develop a new drug averages $897 million. The Pharmaceutical Research and Manufacturers of America (PhRMA) reports that its member companies invested about $32 billion in 2002 in discovering and developing new medicines.
A brand-name company submits information to the FDA on patents it holds on a drag and their expiration dates. Then the agency lists patents on new drags in the publication Approved Drug Products with Therapeutic Equivalence, also known as the Orange Book. Patent protection gives brand-name companies, also known as "innovator" companies, the sole right to sell a drag for a certain period of time. This allows them to fairly recoup their investment costs. Patent protection for drugs typically lasts an average of 11 years. A generic drug can only enter the market after the brand name patent or other marketing exclusivities have expired and FDA approval is granted.
But rising drag costs remain a major challenge for consumers, especially older Americans. "This is where generics play an essential role," McClellan says. "Once the appropriate patent protection has expired, generic medicines give patients an alternative."
On June 12, 2003, the FDA, along with HHS Secretary Tommy G. Thompson, announced new FDA regulations aimed at streamlining the process for improving access to generic drugs. The move is expected to save consumers $35 billion over 10 years, as well as lower costs for state Medicaid programs and employer-provided coverage.
To supplement the regulation, the FDA also launched an initiative called "Improving Access to Generic Drugs." The initiative involves revamping the FDA's review process to put generic drugs into consumers' hands more quickly. President Bush's fiscal year 2004 budget request increases funding for the FDA's generic drag program by $13 million, the largest ever for that program. The additional funds would go toward speeding up generic drug reviews. This funding request would increase the 2003 generic drag budget of $45 million by roughly one-third. According to McClellan, "All of these generic drug reforms are important for the protection of public health in this country. …