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Generic Pharmaceuticals Sector, 2008

U.S. Market Overview

A generic drug is, in essence, a bioequivalent version of a drug whose patent term and period of data exclusivity has expired. This means that the generic drug is similar or equivalent to the innovative drug in dosage form and strength, administration and intended use, safety and quality, and performance characteristics. Generic drugs are widely used in the U.S. because of the significant savings they offer to consumers. In 2005, generic medicines accounted for 56 percent of prescriptions dispensed in the United States, but less than 13 percent of every dollar spent on prescription drugs . According to a 1998 study by the Congressional Budget Office, generic drugs save consumers between $8 and $10 billion every year.

Based on prescriptions dispensed annually, four of the top five pharmaceutical companies in the world are generic manufacturers: they are Sandoz, Teva, Mylan, and Watson, respectively. Of these four companies, two are headquartered in the United States: Mylan and Watson.

The Drug Price Competition and Patent Term Restoration Act (better known as the Hatch-Waxman Act), passed in 1984, is the predominant piece of legislation that increased generic availability in the UnitedStates. The Act allows generic manufacturers to apply for market approval by submitting bioequivalence studies as opposed to clinical data, which has a higher associated cost; this cost savings is passed on to the consumer. Additionally, the Hatch-Waxman Act expedites the approval process of generic drugs, getting the generic to the market faster.

Despite the high percentage of annual prescriptions filled with generics in the United States, the industry still works hard to win consumer confidence, as some consumers who are not familiar with generics may question the products’ safety or efficacy. Over the past few years there has been an enormous effort to educate consumers in the U.S. on the safety and efficacy of generic drugs. The Food and Drug Administration’s Office of Generic Drugs and the Generic Pharmaceutical Association have both taken steps to inform consumers that generics are just as safe as their brand counterparts.