With savings continuing to rise, are we at the apex of the climb or should we be worried? Generic drugs continue to struggle with uptake and placement on formularies, even Medicare Part B, which is where one would assume uptake would be the highest. PBMs place generics on higher tiers in favor of brand-name rebates because they make more money. The squeeze on generic drug pricing is so severe in the competitive generic market that many firms are forced to exit. It has been said that if you are losing a nickel on each unit, you can’t make it up on volume. As generic manufacturers begin to reach that point with products, they tend to discontinue manufacturing, which many times results in drug shortages. The report that we’re about to discuss supports this fact as it indicates that “generic prices continue to experience severe deflation; the overall value of all generic sales in the U.S. has declined by $6.4 billion since 2019 despite increased volume and new generic launches.”
The Association for Accessible Medicines (AAM) U.S. Generic & Biosimilar Medicines Savings Report (here) continues to echo these concerns and also describes how the uptake of generics and biosimilars in the marketplace has slowed down as well as how rebates on certain biologics, paid to PBMs and insurance companies, stifle uptake of more affordable generic and biosimilar products. For instance, “[a]doption of adalimumab biosimilars has been particularly low—at one percent, due to insurer coverage decisions that fail to prioritize lower cost treatments for patients.” Adalimumab is a biosimilar that has the most approved and marketed applications for a specific-brand biologic product, Humira, and, thus, you would think that the uptake would be much higher. The report also indicates that “[w]hile nearly half of the small molecule generics reached over 75 percent market share by the end of 12 months, that is less than in prior years” when market shares of 80-90 percent were common.
Yet savings continue to mount as generics and biosimilars resulted in savings of $445 billion in 2023 with biosimilars accounting for $12.4 billion of that figure. This is an increase of $37 billion over 2022 savings. Quite an impressive increase! But whether we will continue to see these saving rise proportionately from year to year is the question. The generic and biosimilar programs have been successes. Savings continue to increase, but will current pricing policies impact the size of future increased saving or will they become stagnant? The gauntlet has been laid down and how we navigate it will be telling in next year’s numbers.
As David Gaugh, Acting President and CEO of AAM, summarizes in his introductory letter to the report:
“The long-term sustainability and success of these industries and the very health of our nation’s patients – hang in the balance. The rate of drug shortages has increased as manufacturers face challenges including rapid price deflation, supply chain challenges, Medicaid rebate policies that harm generic competition, slower adoption of new products due to abusive pharmacy benefit manager (PBM) financial engineering, and brand drug patent thickets.
We cannot afford to take our generic and biosimilar industries for granted.”
We will revisit this issue when the next annual savings report is issued. We hope that the news will continue to be positive and that policy adjustments will be made to favorably improve the system.
