What does it mean? The Hatch-Waxman Act (formally known as The Drug Price Competition and Patent Term Restoration Act) first passed 25 years ago in 1984 helped make inexpensive generic drugs available to consumers. This law streamlined the process by which generic drug manufacturers could apply for Food and Drug Administration approval of their drugs once the patent on a brand-name medicine expired. Under this law, generic manufacturers can forego expensive clinical trials and instead gain FDA approval based on less costly studies that show their drugs are equivalent to brand-name medicines. This cut the expense of bringing a generic drug to market, which lowered the cost of these medicines for consumers. Generic drugs now comprise more than 60 percent of prescriptions filled—up from 19 percent in 1984, when this law was first enacted. (Learn 10 more ways to cut your drug costs.)

Why the buzz? Now 25-years old, the Hatch-Waxman Act has helped consumers save money even while health-care costs have generally soared. The Act provides generics that are just as safe and effective as brand-name drugs, but at a far lower price—often prices up to 70 percent or less of the brand-names. However, this law has also been used by brand-name drug makers to block generic drugs from becoming available to consumers. Brand-name drug makers have used provisions of the Hatch-Waxman Act to extend their patent that delay generic drugs from entering the market. In addition, brand-name drug makers have made deals with generic manufacturers where the generic firm keeps its drug off the market in exchange for payments from the brand-name firm. Both drug manufacturers benefit from these arrangements, but consumers lose out. (See best drugs for less for related information.)

Another emerging issue that is currently being debated in Congress is that the Hatch-Waxman Act does not provide for an FDA approval process for generic versions of biologics. These branded medicines are important therapies that are used to treat certain cancers, multiple sclerosis and other serious diseases but they can cost more than $100,000. The availability of generic biologics could dramatically reduce prices and save consumers significant amounts of money. Congress is currently considering legislation that would pave the way for FDA approval of generic biologics, or biosimilars, but so far, the issue remains unresolved.