Why the U.S. Takes More Generic Drugs Than Any Other Country

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By Samuel Taube

There aren’t many bipartisan issues in U.S. politics these days… but the need to reduce drug prices is one of them. Whether you live in a red state or a blue state… whether you love President Trump or hate him… we can all agree – our prescription costs are too darn high.

The amount Americans spend on prescription drugs per capita is almost twice as much as the Organization for Economic Cooperation and Development’s average. And the difference in the cost of brand-name drugs is even larger.

That’s why we take more generic drugs than any other industrialized country, as you can see in this week’s chart.

Biotech investors who focus on brand-name drug companies are ignoring the drugmakers that account for more than 80% of prescription volume in the U.S.

It’s important to understand how we got to this point – and what it means for your portfolio. Let’s take a look inside America’s unique drug pricing situation…
How Generic Drugs Took Over the U.S.
In the late 20th century, most industrialized countries were building government-run healthcare systems. As we all know, the U.S. took a different path, opting for market-based solutions instead.

In 1984, Congress reshaped America’s pharmaceutical industry by passing the Hatch-Waxman Act. The law sped up the approval process for generic drugs while strengthening patent protections for developers of new drugs.

Hatch-Waxman drastically increased the availability of generics, and it simultaneously made it easier for brand-name drugmakers to insulate themselves from competition with patents.

In the process, it created a substantial difference in pricing between brand-name drugs and generics – and helped generics capture more than four-fifths of our prescription drug market.

What Generic Drug Dominance Means for Your Portfolio
As we said above, no biotech portfolio is complete without some exposure to the generic drug industry. Why invest in only 18% of U.S. prescription volume?

The VanEck Vectors Generic Drugs ETF (Nasdaq: GNRX) provides an easy way to add generics to your portfolio. The fund has returned a respectable 16.1% over the last year, and it carries a low expense ratio of just 0.5%.

But if you’re one of the millions of Americans who have struggled to afford prescription drugs, there’s a better way to recoup your spending. Oxford Club Chief Income Strategist and resident biotech guru Marc Lichtenfeld has been researching an obscure new law known as H.R. 2430.

The lack of media attention around this bipartisan legislation is astounding. The law gives Americans an exciting new way to pay for their prescription drug costs. To learn more, click here.
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Source:: Investment You

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