New US GAO report highlights critical role of generics in containing health spending

Prescription drug spending in the USA reached $307 billion in 2010 - an increase of $135 billion since 2001 - and comprised approximately 12% of all health care spending in the country, according to a new report for the US Government Accountability Office (GAO).

Until the early 2000s, drug spending was one of the fastest growing components of health care spending. However, since that time, the rate of increase has generally declined each year, attributable in part to the greater use of generic drugs, which are copies of approved brand-name drugs, the report notes.

The competition that brand-name drugs face from generic equivalents is associated with lower overall drug prices, particularly as the number of generic manufacturers grows and price competition among them increases.  On average, the retail price of a generic drug is 75% lower than that of a brand-name drug, the GAO said.