Generic Drug Prices Are Falling, but Are Consumers Benefiting?

Generic drug prices have been declining in the United States since at least 2010, according to an August 2016 report by the Government Accountability Office.

They have fallen even in the face of high-profile exceptions: Dozens of old generic drugs have risen in price in recent years, for reasons that include supply disruptions and competitors’ leaving the market.

For example, the price that pharmacies paid for the antibiotic doxycycline hyclate increased to $3.65 a pill in 2013 from 5.6 cents in 2012, according to an analysis of pricing data by Adam J. Fein, president of Pembroke Consulting, who researches the drug-distribution industry. The spike in prices of doxycycline and other generic drugs led to a congressional investigation as well as state and federal inquiries into price-fixing that are still underway. A coalition of state attorneys general have accused a number of companies of colluding to keep prices high.

Mr. Fein said the price of doxycycline has since declined to 60 cents a pill. “That’s a big switch,” he said.

Despite these cases, the trend toward deflating generic prices appears to have accelerated as companies have more aggressively undercut each other’s prices.

Making matters worse for the generics companies, they are missing out on peak profit potential because not as many brand-name products are losing patent protection. The six-month period after a drug goes generic is typically the most lucrative time for the first company to market. And the Food and Drug Administration has been clearing out a backlog of generic-drug approvals, meaning more competitors are now entering markets for certain drugs.

In a recent call with Wall Street analysts, George S. Barrett, the chairman and chief executive of Cardinal Health, a major drug distributor that reported declining profits last week, said generic deflation was not new, but that the company historically had been able to anticipate it. “It just looked a little different than we had seen,” he said.

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