Fresh evidence of the power of generic drugs to
reduce US health costs surfaced as part of a new
FDA study that documents the sharp declines in
prescription drug prices following the onset of
generic competition. According to the analysis,
much of the downward pressure on Rx price levels
occurs after 2 generic versions reach the market.
When a brand name drug faces only one generic
competitor, the discount associated with that single
generic averages only 6% of the branded drug's
price. The FDA, however, found that as additional
generics reach the market, prices begin to fall dramatically.
When a second generic manufacturer
launches its product, the average per-dose price for
the generic medication falls to 52% of the brand
name version's cost.
Prices continue to decline as more generic competitors
enter the market. According to the FDA
analysis, when 9 generic versions become available,
these products sell for an average of just 20%
of the price of the brand name product. The FDA's
analysis was based on 1999-2004 retail sales data
on single-ingredient drug products collected by IMS