Why Are Generic Drugs Getting So Expensive?

July 20, 2017

Why Are Generic Drugs Getting So Expensive?

  1. Daniel D. Dressler, MD, MSc, SFHM, FACP

When market competition drops, generic drug prices rise (sometimes exorbitantly).

  1. Daniel D. Dressler, MD, MSc, SFHM, FACP

As the use of generic drugs has grown substantially to >85% of dispensed U.S. prescriptions, prices of some commonly prescribed generic drugs have also risen dramatically. In a retrospective cohort study of >1 billion prescription drug claims from >57 million patients within a database including 130 commercial health plans, investigators evaluated the effects of market competition on prices of 1120 generic drugs from 2008 to 2013. Using a structured scoring measure of market competition that incorporated number of generic drug manufacturers and market share for each manufacturer, they designated each drug as low-, medium-, or high-competition. Overall price (out-of-pocket cost + third-party payment) of dispensed generic prescriptions per quantity of drug dispensed was correlated with competition level, controlled for market size and baseline drug price.

Increases in mean generic drug prices were inversely proportional to competition level: 64% for low-competition drugs, 44% for medium-competition drugs, and 10% for high-competition drugs. Some low-competition drugs rose in price by >1000% in <6 years.

Comment

While this study demonstrates an obvious macroeconomic effect (i.e., manufacturer market competition for generic drugs has an impact on drug costs), the microeconomic effect on individual patients whose medical conditions rely on low-cost generic drugs can be great, especially for life-threatening conditions. Regulatory policies that encourage competition or limit monopoly manufacturers of generic drugs may be necessary — and vital — to achieve reasonable drug costs.

Editor Disclosures at Time of Publication

  • Disclosures for Daniel D. Dressler, MD, MSc, SFHM, FACP at time of publication Royalties McGraw-Hill Editorial boards Journal of Hospital Medicine (Frontline); Principles and Practice of Hospital Medicine (McGraw-Hill)

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