Explanation of Estimate of S. 812

CBO estimates approximately $4.7 trillion in total prescription drug expenditures in the U.S. over the ten-year period (2003 through 2012).

Approximately $320 billion (around 7 percent) of total expenditures could be saved over the ten-year period if all delays in the market entry of generics related to patent challenges were eliminated.

This legislation would reduce the delay by about 20 percent, thus reducing total drug spending by about $60 billion (or 1.3 percent) across the country over the next ten years.

Because the proportion of pharmaceuticals purchased or provided by the federal government is quite low, reducing the delay in the entry of generics would reduce federal direct spending for prescription drugs by $5.9 billion and increase federal revenues by $2.2 billion. (The revenue effect occurs, because with lower drug costs, a greater proportion of employees’ compensation would be in the form of taxable income.)