WASHINGTON - While competition from generic drugs saves U.S. consumers billions of dollars every year, it also cuts significantly into the profits from new drugs, reducing incentives to conduct research and development, according to a new study by the Congressional Budget Office (CBO).

Americans saved $8 billion-$10 billion in 1994 by substituting generics for brand-name drugs, and with increased pressures to reduce health care costs savings from generic substitutions have increased in the last four years, CBO reported.