Generic Drugs Replace Brands

Over the next five years the annual spending on drugs by patients in United States is projected to fall by fifty percent as patients are going for the generic versions of the medicines which are available at a much lesser cost over expensive drugs from the brands.
The report was released by the IMS Institute for Healthcare Informatics on Tuesday. The report projects that the global expenditure on drugs will touch almost $1.1 trillion by the year 2015. However, the annual compounded rate of growth will be reduced by 3 to 5 percent by the year 2015, in comparison to the 6.22 percent growth since the past five years. The report also gives some good news to branded drugs over increase in purchases worth over $15 billion till the year 2015.

According to estimate by the report, the Government health plans and health insurers will save almost $98 billion in tax payers’ money that would have instead spent on costly branded drugs. United States will be the largest spender on generic alternatives according to the report. The overall market share for drugs from big brands will come down to 52 percent from the current 64 percent, according to the reports. The reduced cost of drugs will come as a huge respite to patients who might be surprised by the money saved on drugs.
The global recession of 2008 along with the stiff government orders to control drug costs in countries such as Italy, Japan and China are the main reasons for the reduced growth rate. The study did not however include the discounts and rebates that are offered by branded drug companies, which are projected to add as much as $75 billion by the year 2015.
According to the report, the overall investments in the pharmaceutical industry research and development sector have increased, with big companies going in for acquisition to offset the loss of revenue in the form of generic competitors. Companies are also forcing the research and development sectors of companies to increase its productivity, which is turning out to be a huge struggle.
In 2010, in Untied States only 21 drugs were approved by the FDA regulators. This is the lowest since 2007 and also the first year that major drug companies such as Merck & Co. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), Eli Lilly & Co. (NYSE:LLY) and others failed to gain a drug approval. This year however, Bristol-Myers Squibb (NYSE:BMY) has successfully won an approval for a skin cancer treatment drug and Merck & Co. has been successful in gaining approval for hepatitis C drug.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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