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GPhA: Reconciliation Bill Will Bring Savings to Taxpayers Through Change in Authorized Generics Calculation

Brands Must Include Product’s “Best Price” in Reports to Medicaid

ARLINGTON, VA, February 8, 2006 -- Taxpayers could save hundreds of millions of dollars under a new Medicaid provision in the budget reconciliation bill (Deficit Reduction Act, S. 1932) that President Bush signed into law today. The new law contains a provision that will require brand pharmaceutical companies to include authorized generics in the “best price” calculation that is provided to the Centers for Medicare and Medicaid Services (CMS). The Generic Pharmaceutical Association (GPhA) supported the provision to ensure equity and fairness in the system.

“This provision is a win for states and the federal government, who stand to benefit from requiring brand companies to report their lowest authorized generic price,” said Kathleen Jaeger, GPhA President and CEO. “Taxpayers will no longer be forced to pay more for these medicines than necessary. This change should save millions of dollars annually.”

Authorized generics are brand products that are masquerading as generics and are generally marketed only during the 180-day exclusivity period awarded to the first generic company that has successfully challenged a questionable patent.

Due to an ambiguity in the current law, some brand companies were not required to include authorized generics in their best price calculation, diverting government and taxpayer savings. According to some estimates, the new provision could save taxpayers $150 million over five years, although GPhA anticipates the savings to be greater.

The industry, however, remains concerned about other issues surrounding authorized generics. Last year, the Federal Trade Commission agreed to conduct a study on the competitive effects of the use of authorized generics. GPhA welcomed the study and also is encouraging Congress to reevaluate FDA’s treatment of authorized generics.

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic drug industry. Generics represent 53% of the total prescriptions dispensed in the United States, but less than 12% of all dollars spent on prescription drugs. For more information about the industry and its issues, visit www.gphaonline.org.

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