Off-patent drugs make up 91% of prescriptions, but only 18% of spending - report
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Generic and biosimilar medicines represented 91% of the 6.4B prescriptions Americans received in 2021 but accounted for only about 18% of medicinal spending, the latest industry report from the trade group Association for Accessible Medicines (AAM) indicates.
Generics and biosimilars are more affordable but highly similar versions of brand-name drugs. While generics are small molecules manufactured from chemicals, biosimilar products are typically larger, more complex compounds synthesized from living systems.
"In fact, the share of spending attributable to brand drugs has risen even as the total number of prescriptions filled by brand drugs has declined," the authors wrote. 
The publication, titled "2022 U.S. Generic & Biosimilar Medicines Savings Report," is based on pre-expiry brand prices of over 1,200 generic molecules and their annual sales and volume data.
AAM represents leading stakeholders in the market for generic and biosimilars, such as Teva (NYSE:TEVA), Amneal Pharma (AMRX), Dr. Reddy's (RDY), Sandoz unit of Novartis (NVS), AmerisourceBergen (ABC), Premier Inc. (PINC), Fresenius (FMS) and Amphastar Pharma (AMPH).
Other notable players in the market include Viatris (VTRS), Amgen (AMGN), Pfizer (PFE), Eli Lilly (LLY), Sanofi (SNY) (OTCPK:SNYNF) (GCVRZ), and Organon (OGN)
According to AAM estimates, the off-patent drugs saved more than $373B for the U.S. healthcare system in 2021, and the savings over the past ten years reached $2.6T, with an annual growth of 7-10%, consistently.
The savings estimate for 2021, which implies a $33B increase from 2020 and a $7B contribution from biosimilars, includes $119B and $178B savings for Medicare and commercial health plans, respectively.
Meanwhile, according to the report, new generics and biosimilars saved $93B for the U.S. healthcare system in 2021, despite challenges for their uptake.
"Although these savings are important, they are also less than what is possible. Increasingly, new generics and biosimilars face challenges to adoption due to delays in health plan coverage," the authors wrote.
The researchers argue that after the market launch of a generic product, it takes about three years for more than half of all Medicare health plans to cover the treatment. Even the coverage for first generics stagnates over time after more than half of private insurers opt to cover such drugs the year after the launch.
"It is critical that employers and policymakers ensure that health plan formularies cover and prioritize lower-cost generics as quickly as possible," the authors point out.
According to the report, since the first approval in 2015, the FDA greenlighted 39 biosimilars across 11 molecules while 22 products reached the market leading to more than $13B in savings. On the impact of biosimilar competition, the researchers argue that the new products can lower the cost of both the reference product and copycat version.
Further savings are ahead, given the strong biosimilar pipeline. Per the report, more than 95 biosimilars are currently in development, marking approximately 50% increase over the past four years.
The authors also point to the biosimilar launches scheduled for 2023 and 2024 targeted at Humira and Stelara, the blockbuster autoimmune medications developed by AbbVie (ABBV) and Johnson & Johnson (JNJ), respectively.
"The success of these market entrants will be impacted by the degree to which health plans encourage use of the lower-cost biosimilar over the brand," they added.
Meanwhile, Seeking Alpha contributor Macrotips Trading argues that investors have "overly penalized" AbbVie (ABBV) for the upcoming patent cliff for Humira in the U.S. The author sees the company's patient support program, Humira Complete, as a tool to defend Humira market share over low-cost biosimilars.