Generic drugs help cut down costs for consumers. These drugs are typically priced at a significant 50% to 70% discount to name brand counterparts. Consequently, many health care services have been actively encouraging consumers to purchases these low cost alternatives, especially in an environment of rapidly increasing costs and aging populations.
From 2013 to 2018, generics are expected to account for 52% of global pharmaceutical spending growth, compared to 35% for name brand drugs, according to IMS Health. Meanwhile, sales for generics are expected jump to $442 billion in 2018 from $267 billion in 2013, an annualized growth rate of 10.6%.
When a company first develops a drug, a patent is filed on the new drug, which typically expires 20 years from the date of filing. As patents expire on various brand name drugs, generic drug providers can step in to the market at a significant discount. From 2011 to 2020, drugs with annual sales of $200 billion will be losing their patent protection. Looking ahead, the biologics patent cliff over the next decade could add to a new group of affordable generics.
Max Chen contributed to this article.