Generic drug prices increase when market competition decreases

1. The authors of this study found an association between market competition and generic drug prices.

2. Measuring market competition may help identify drugs requiring intervention to avoid increases in generic drug prices.

Evidence Rating Level: 2 (Good)

Study Rundown: In the United States, generic drug use has increased over the past few years, resulting in decreased costs for both the health care system and patients. Unfortunately, generic drug prices have also recently increased. The authors of this study aimed to determine the association between market competition levels and the change in generic drug prices in the United States. The study has several limitations. First, the study findings may not be applicable to drugs that became generic following 2008. Second, as the study ended after the first half of 2013, following this time period, different mechanisms may have played a role in increasing generic drug prices. Overall, the results of this study suggest that market competition levels were associated with a change in generic drug prices.

Click to read the study, published in the Annals of Internal Medicine

Relevant Reading: Differences in generic drug prices between the US and Canada

In-Depth [retrospective cohort]: Prescription claims from commercial health plans between 2008 and 2013 were included in this retrospective cohort study. The Herfindahl-Hirschman Index (HHI) equation was then used to estimate market competition levels for each drug. The lower the HHI value, the higher the level of drug competition. Generally, the authors observed that baseline competition levels were associated with price changes from baseline values. In particular, drugs with quadropoly (HHI value of 2500), duopoly (HHI value of 5000), and near-monopoly (HHI value of 8000), and monopoly (HHI value of 10 000) levels of baselime competition were associated with price changes of 31.7% (95%CI, 34.4% to 28.9%), 11.8% (CI, 18.6% to 4.4%), 20.1% (CI, 5.5% to 36.6%), and 47.4% (CI, 25.4% to 73.2%) respectively. Additionally, low competition levels had a larger effect on generic drug price in lower-priced drugs compared to higher-priced drugs.

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