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The Industry

In the 1960s, a government effort to prove the safety and effectiveness of pharmaceuticals manufactured

prior to 1962 helped to launch the generic pharmaceutical industry. In 1962, the National Research

Council of the National Academy of Sciences was instructed to evaluate all drugs that had been approvedfor use prior to that year. Under its Drug Efficacy Study Implementation (DESI) program, the National

Research Council reviewed more than 3,000 products. The list produced by this review described which

products were effective for all claimed indications, which were probably or possibly effective for claimed

indications, and those which were ineffective for claimed indications.

As a result of the review, generic manufacturers were able to file for approval to manufacture products

that had been ruled effective without the need to conduct biostudies. Thus, a number of pre-1962

medications, if made to the prescribed chemical formula, were able to enter the market without additional

study.

It wasnt until passage of the Drug Price Competition and Patent Term Restoration Ac t of 1 984,

commonly known as Hatch-Waxman, that the generic industry truly blossomed. This landmark law

created the regulatory mechanism under which the Food and Drug Administration can approve affo rdable

pharmaceuticals. As President Ronald Reagan said at the time, Hatch-Waxman provided regulatory

relief, increased competition, economy on government, and best of all, the American people will save

money, and yet receive the best medicine that pharmaceutical science can provide.

Over nearly three decades, President Reagans prediction has proven to be true. The generic industry has

grown dramatically and use of generic drugs has saved the U.S. health care system approximately $1.07

trillion over the past decade alone (2002 through 2011) with $192.8 billion in savings achieve in 2011

alone. From a modest beginning, today nearly 80% of all prescriptions are filled with generic medicines.

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Brand pharmaceutical sales for 2011 account for 73% of total dollars spent in the U.S. on prescription

medicine (Source: IMS Health, National Sales Perspectives, Nov. 2011, National Prescription Audit,

Dec. 2011)

Generic pharmaceuticals fill 80% of the prescriptions dispensed in the U.S. but consume just 27% of

total drug spending. (Source: IMS Health, National Sales Perspectives, Nov. 2011, National

Prescription Audit, Dec. 201 1)

The top five U.S. corporations by unbranded generic prescriptions dispensed are Teva

Pharmaceuticals USA, Mylan Labs, Inc., Actavis (formerly Watson Pharmaceuticals), Sandoz

(Novartis), and Lupin Pharma respectively .

By the end of 2016, brand biologics with $40 billion in U.S. sales will come off patent. Combining that

number with the more than $20 billion in brand biologics that are already off patent, this represents

more than $60 billion in annual spending in the U.S. (Source: Grant Thornton,Bio-dynamism: Insights

into the Biosimilars market: An Overall Perspective, Feb. 201 3)

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