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By John Murphy, President and CEO of AAM
The generic and biosimilar medicines market in the United States plays a pivotal role in reducing health care costs, delivering robust savings in many critical treatment categories, and introducing needed competition that forces the market to offer patients better access as innovation marches forward. As we look towards 2025, especially when considering the new presidential administration’s significant agenda for U.S. market reforms, generic and biosimilar medicines stand as key drivers of efficiency and cost savings while maintaining the high degree of safety and efficacy we demand from commercial prescription medicines.
Despite constituting 90% of daily prescriptions filled, generics and biosimilars account for just 13% of overall drug spending and less than 2% of overall U.S. health care spend. Over the past decade, these medicines have saved the U.S. health care system more than $3 trillion, including $445 billion in 2023 alone. However, the industry faces challenges that require urgent attention to continue delivering these benefits. While addressing these many obvious market distortions, it is also possible to align around new incentives and pro-generic policies that could supercharge this market in the United States — delivering not only robust savings and patient access, but new jobs and economic productivity as well.
Regulatory and market dynamics
Generic and biosimilar medicines are integral to a cost-effective health care system — if they can only reach patients in the first place. Policies promoting faster adoption can substantially reduce patient expenses while ensuring safe and effective treatment globally. Yet, market pressures threaten the industry’s future. Today in the U.S. market, a pricing race to the bottom, compounded by brand drug and insurer rebate and patent strategies, leave many generic manufacturers undercompensated, stifling investment and innovation and threatening the long-term outlook for generic medicines as options for patients.
The Association for Affordable Medicines (AAM) and our members see many opportunities to address these systemic issues, urging reform from the administration and Congress. Today, proposals for patent reform are a critical and obvious first step. Patent thickets, where numerous patents are applied to a single product to delay competitors, challenge the balance between protecting innovation and encouraging competition. Bipartisan legislation aims to counter these practices and reinstate the original bargain of the Hatch-Waxman Act. This could be a first in what are several achievable legislative fixes next year that will protect the original social contract struck by Hatch-Waxman all those years ago.
Addressing market distortions
Our market also struggles with distortions caused by pharmacy benefit managers and a narrow yet powerful purchaser marketplace. Initially established to negotiate on behalf of patients, PBM functions have deviated, many times leveraging rebates and tiered formularies against generics in favor of continued branded monopoly pricing. Current legislation in the Senate Finance Committee could begin the necessary reforms to restore PBMs’ intended roles.
Yet for long-term sustainability, health care policies need to prioritize generics and biosimilars as the preferred first-line therapies post-approval. We need to reframe market policies to promote generic and biosimilar medicines for patients and return innovator focus to developing new medicines once exclusivities on older products have expired.
Further, ensuring savings from generics and biosimilars are felt by patients at the pharmacy counter will go a long way in prioritizing these medicines at the forefront of health care mindset. Too often, insurance and PBM design disfavors lower-cost medicines due to rebate and bundling practices, driving a wedge in the narrative that newer biosimilars are intended to save a patient money. Attention to these practices is a good start in Congress, and we need to use this momentum to further policies that truly deliver savings for patients.
Overcoming perceptual and
regulatory challenges
Confusion over past practices also clouds today’s dialogue in policy circles. For instance, misunderstandings about patent settlements, often perceived as delaying tactics, need correction. Settlements today enable faster access to affordable generics by resolving often costly and uncertain litigation quicker, thereby accelerating generic launches at lower costs than if every patent were required to be litigated. Similarly, the Food and Drug Administration’s historical and broadly accepted practice of approving “skinny labels” to expedite generic launches faces complications from recent court decisions, necessitating swift congressional action.
Moreover, broader governmental policies must consider impacts on this critical sector as well. The FDA, as a regulatory authority, is vital in ensuring the safety and efficacy of all medicines available in the U.S. Swiftly addressing accelerating misinformation about FDA’s role is imperative to uphold trust in the drug approval process.
Trade relations and industry resilience
Widening the aperture a bit, the global nature of the health care supply chain, especially for generics and biosimilars, highlights the importance of a comprehensive and clear-minded approach to international trade relations in the next few years. Aligning supply chains across diverse markets helps keep costs down. As such, U.S. trade policies must assess the impact on our cost-saving market as discussions surrounding U.S. trade relations evolve.
At the same time, we have an opportunity (similar to that presented with the microchip industry a few years ago) to collectively prioritize the sustainability and resiliency of the generics marketplace through targeted incentives and other policy levers that could mobilize the industry in this country, address shortages, and deliver a more robust global generics industry that enhances the U.S.’s place as a leader in health care delivery and production. And AAM members are primed to lead this discussion.
Conclusion
The outlook for generics and biosimilars in the U.S. is promising. These medicines unlock significant savings and allow innovative pharmaceuticals to focus on new advancements. However, sustaining this industry requires confronting and resolving mounting challenges. Through collaboration with Congress, the administration and the broader health care community, we can pave the way for continued growth and savings in 2025 and beyond.
