Every year, the FDA approves hundreds of generic drugs - and each one saves patients and the healthcare system millions, sometimes billions, of dollars. But how much do these approvals actually save? And why do the numbers jump from year to year? The answer isn’t just about how many generics get approved - it’s about which drugs they replace.
What the FDA Tracks: Savings from New Generic Approvals
The FDA doesn’t just count how many generic drugs get approved. It tracks how much money those new approvals save in the first 12 months after they hit the market. This is called first-year savings from new generic approvals. It’s not the total savings from all generics in use - it’s the immediate drop in price when a brand-name drug loses its monopoly.
Here’s what happened in recent years:
- 2018: $2.7 billion saved
- 2019: $7.1 billion saved - the highest on record
- 2020: $1.1 billion saved
- 2021: $1.37 billion saved
- 2022: $5.2 billion saved
Why such wild swings? Because savings depend on which brand-name drugs lose patent protection. In 2019, several high-cost drugs - like the cholesterol medicine Repatha and the diabetes drug Januvia - went generic all at once. That pushed savings to a record high. In 2020, fewer big-ticket drugs expired, so savings dropped sharply. In 2022, major approvals included generics for the blood thinner Pradaxa and the asthma drug Advair, both of which had annual sales over $3 billion. That’s why savings jumped back up.
The FDA found that when a new generic enters the market, the brand-name version’s price typically drops by more than 70% within a year. The generic itself usually sells for 80-95% less than the brand. That’s not a small discount - it’s life-changing for people paying out of pocket.
Total Generic Savings: What the Industry Reports
The FDA’s numbers show the impact of new entries. But the real picture of savings comes from the Association for Accessible Medicines (AAM). They measure total savings from all generic drugs in use during a calendar year - not just the new ones.
In 2023, generics and biosimilars saved the U.S. healthcare system $445 billion. That’s more than the entire annual budget of the Department of Education. Here’s how that breaks down:
- Commercial insurers saved $206 billion
- Medicare saved $137 billion - an average of $2,672 per beneficiary
- Medicaid saved $102 billion
By therapeutic area, the biggest savings came from:
- Heart disease: $118.1 billion
- Mental health: $76.4 billion
- Cancer: $25.5 billion
These aren’t theoretical numbers. For someone taking a daily blood pressure pill, a generic can cut their monthly cost from $150 to $10. For a cancer patient on a targeted therapy, switching to a generic can drop a $10,000 monthly bill to under $500.
Why the Two Numbers Are So Different
The FDA’s $5.2 billion in 2022 and the AAM’s $445 billion in the same year aren’t contradictory - they’re measuring different things.
The FDA looks at what happens in the first year after a single generic is approved. If that drug was selling for $1,000 per month and the generic drops it to $50, and 100,000 people switch, that’s $540 million saved in a year - just from that one drug.
The AAM looks at every generic drug being used right now - thousands of them - and compares what people actually paid versus what they would have paid if all those drugs were still brand-name. That’s why the total is so much higher. The FDA tracks the spark. The AAM measures the whole fire.
Who Benefits the Most?
It’s not just insurers and pharmacies that save money. Patients do too - but not always as much as you’d expect.
On average, a generic prescription costs $6.97 out of pocket. Ninety-two percent of generic prescriptions are filled for under $20. That’s a massive win for people without insurance or those with high deductibles.
But here’s the catch: savings don’t always reach the patient. Pharmacy Benefit Managers (PBMs) negotiate rebates with drugmakers. When a generic is approved, the brand company often pays a rebate to the PBM to keep the drug on the formulary. That rebate doesn’t go to the patient - it goes to the middleman. A 2023 Senate Finance Committee report found that only 50-70% of the savings from generics actually make it to the consumer’s pocket.
State Medicaid programs see the clearest benefits. California’s Medi-Cal program saved $23.4 billion in a single year from generics. Alaska, with a much smaller population, still saved $354 million. The scale matches the population - but the impact is just as real.
The Bigger Picture: Generics Are the Backbone of Affordable Care
Generics make up 90% of all prescriptions filled in the U.S. - but they account for only 13.1% of total drug spending. That’s the power of competition.
The Hatch-Waxman Act of 1984 created the modern generic approval system. Back then, the FDA expected $1 billion in annual savings. Today, that number is over $400 billion. The system works - but it’s under pressure.
Brand-name companies are using legal tactics to delay generic entry: patent thickets, evergreening, and REMS (Risk Evaluation and Mitigation Strategies) that restrict access to samples needed for testing. The FDA’s 2023 Drug Competition Action Plan is trying to crack down on these delays.
Also, newer drugs - especially biologics - are harder and more expensive to copy. Biosimilars (the generic version of biologics) have only been around since 2015. As of August 2024, the FDA had approved 59 biosimilars. Their savings are still small compared to traditional generics, but they’re growing fast.
What’s Next?
Looking ahead, the pipeline is strong. Dozens of blockbuster drugs will lose patent protection between 2025 and 2030, including the arthritis drug Humira, the psoriasis drug Stelara, and the migraine drug Emgality. Each one could save billions.
By 2033, U.S. generic drug revenue is projected to hit $131.8 billion. That doesn’t mean drug companies are making more - it means more people are using cheaper versions. The real win? Lower costs for patients, fewer financial barriers to treatment, and a system that works better because of competition.
Generics aren’t just cheaper pills. They’re the reason millions of Americans can afford to take their medicine every day. And every year, the FDA’s approval list is a direct line from policy to pocketbook savings.
How are savings from generic drugs calculated by the FDA?
The FDA calculates savings by comparing the brand-name drug’s price before generic entry to the price after. They multiply the price difference by the number of prescriptions filled with the generic. They also account for the brand-name drug’s price drop after the generic enters the market. This is done for each new generic approval during the first 12 months after approval.
Why did generic savings drop in 2020 after being so high in 2019?
Savings depend on which brand-name drugs lose patent protection. In 2019, several high-revenue drugs like Januvia and Repatha went generic at the same time, driving savings to $7.1 billion. In 2020, fewer major drugs expired, so the total savings dropped to $1.1 billion. It’s not a decline in generic approvals - it’s a shift in which drugs are affected.
Do patients actually pay less when generics are approved?
Yes - but not always the full amount. The average generic copay is $6.97, and 92% of generics cost under $20. However, Pharmacy Benefit Managers (PBMs) often keep part of the savings as rebates. Studies show only 50-70% of the cost reduction reaches the patient directly.
What’s the difference between a generic and a biosimilar?
Generics are exact copies of small-molecule drugs, like aspirin or metformin. Biosimilars are highly similar - but not identical - copies of complex biologic drugs, like insulin or Humira. Biosimilars are harder and more expensive to develop, which is why they’ve taken longer to enter the market. As of 2024, the FDA has approved 59 biosimilars.
How many generic drugs does the FDA approve each year?
The FDA approves between 600 and 750 generic drug applications each year. In 2022, it approved 742 applications. Not all of these are first-time generics - many are additional versions of drugs that already have generics on the market. The number of first generics (new entries into a previously brand-only market) varies from year to year, ranging from 40 to 80.
What’s the long-term impact of generic drug savings?
From 2014 to 2023, generics and biosimilars saved the U.S. healthcare system $3.1 trillion. That’s enough to cover the annual cost of Medicare for all Americans for over a decade. The AAM projects cumulative savings will reach $3.9 trillion by 2028. These savings keep medications affordable, reduce insurance premiums, and prevent patients from skipping doses due to cost.