As the number of manufacturers producing a generic drug increases, the costs of these drugs fall, a recent study suggests.
Chintan V. Dave, PharmD, PhD, from Brigham and Women's Hospital, Boston, Massachusetts, and colleagues reported their findings in a correspondence to the editor published online December 27 in the New England Journal of Medicine.
"With 1.9 billion prescription claims, the number of manufacturers of the generic drug was strongly associated with relative price," the authors write.
"Larger drug markets saw a steeper decline in the relative prices for the first four manufacturers than did their smaller counterparts."
The US healthcare system has saved more than $1 trillion in the past decade by using low-cost generic medications. However, the costs of some generic drugs have dramatically increased in recent years as a result of decreased market competition.
"Effective competition can ensure low prices of generic drugs," the authors say, "but how much is needed remains an open question."
To help address this knowledge gap, Dr Dave and colleagues conducted a retrospective study in which they assessed the relative prices of generic and brand-name drugs using commercial claims data from 2008 to 2014. They excluded drugs with a narrow therapeutic index from the study.
The researchers examined 1.9 billion prescription claims and found a significant association between the number of generic drug manufacturers and the relative cost (P < .001 for trend) of the drug.
According to the authors, the costs of the generic drug and the brand-name version were similar (the generic drug cost was 87% relative to the brand-name price) when there was just one manufacturer of the generic drug in the market.
However, they found that generic drug costs fell as market competition rose.
The corresponding relative price decreased by 10 percentage points (relative price, 77%) for generic drugs with a second manufacturer in the market, and by an additional 17 percentage points (relative price, 60%) with three manufacturers.
With each additional generic drug manufacturer beyond three in the market, the relative prices fell at a slower rate.
These findings were similar across all years of the study, the authors note.
In an effort to increase generic drug competition, the US Food and Drug Administration recently announced that they will expedite review of applications for generic drugs for which there are fewer than three manufacturers currently in the market.
The results of this study support this threshold, the authors say, because the effect on drug costs by the market entry of a generic drug manufacturer was most prominent for the first three competitors.
"However, other initiatives, including importation from trusted sources, should be considered to ensure the maximal amount of competition in the generic-drug market," Dr Dave and colleagues conclude.
One author has reported receiving grants from the Laura and John Arnold Foundation, the Engelberg Foundation, and the US Food and Drug Administration, as well as an Ignition Award from the Harvard Program in Therapeutic Science. The remaining authors have reported no financial conflicts of interest.
N Engl J Med. Published online December 27, 2017. Full text
Medscape Medical News © 2017 WebMD, LLC
Send comments and news tips to news@medscape.net.
Cite this: Nicola M. Parry. Decreasing Market Competition Driving Up Generic Drug Costs - Medscape - Dec 28, 2017.
Comments