For example, generic drugs in some states account for nearly half of claims paid, "yielding considerable savings as the average cost of a generic is much lower than the cost of a brand-name drug
," the report said.
The rules also restrict the types of patents that brand-name drug
makers can list with the federal government and bar "frivolous" patents, such as those on packaging that previously were used to trigger delays in generic competition, according to The Wall Street Journal and USA Today.
But once the drug company loses the patent, the price of the brand-name drug
usually drops in price, said John Fitzgibbon, partner in charge of the managed-care practice at KPMG LLP, an accounting and tax firm.
Once people make the switch from a brand-name drug
Both generic and brand-name drug
makers must submit information to show the approved products are being manufactured to the FDA's specifications.
For example, a member whose copay is $40 for a formulary brand-name drug
and $10 for a generic would pay $10 for the brand-name drug
, a yearly savings of $360.
Revenue growth is supported by the launch and uptake of new brand-name drug
products in 2007 and growing demand for pharmaceuticals commercialized over the past few years.
Enabling the consumer to make the choice between a brand-name drug
and generic is laudable, but the discretion will ultimately be up to the doctors.
The 1984 Hatch-Waxman amendments to the Food, Drug, and Cosmetic Act encourage early generic entry by providing an incentive of a 180-day exclusivity period for generics companies that successfully challenge brand-name drug
The proposed rules ultimately alter the playing field for brand-name drug
makers by allowing more generic labels to enter the market.
However, even using the Center for Medicare and Medicaid Services' optimistic estimates, seniors enrolled in the new discount card program would at best see average brand-name drug
discounts ranging from 11 to 17 percent -- negating much of the potential savings from the discount cards.
For example, when the brand-name drug
Prozac is entered, users are notified that a generic equivalent (fluoxetine) is available.