Generic entry and effect of market competition on outpatient pharmacy drug prices

Abstract

This study assessed the impact of generic drug market competition on prices, accessibility, and savings. It analyzed delays in generic drug market entry and the effect of competition on the price trends of outpatient pharmacy drugs facing generic competition from 2013 to 2018. Data were extracted from the FDA website, including a list of new generic drugs, and from the Centers for Medicare and Medicaid Services, including National Average Drug Acquisition Cost (NADAC) and Average Manufacturer Price (AMP). Descriptive and time-series analyses were conducted. On average, generic drugs entered the market 8.4 months after FDA approval and 16.6 years after the initial FDA approval of the brand-name drugs. The median NADAC price of generic drugs was 65.7% of the brand-name drugs’ price at market entry and decreased to 26.0% after three years. The median brand-name drug NADAC price increased by 1.0% per month before generic entry, remained stable during the generic entry period, and increased by 0.4% per month afterwards. Generic competition not only lowered drug prices but also influenced brand-name drug price trends both before and after generic entry. The price reductions from generic competition exceeded previous estimates that only compared prices at the time of generic market entry.