Author Description

This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1998-07 Excerpt:...Act, competition from generic drugs in terms of price and market share was limited primarily to antibiotics.53 In 29 cases other than antibiotics in which top-selling brandname drugs had generic copies available, generic market share averaged just 12.7 percent of prescriptions dispensed through retail pharmacies in 1980." The probability of generic entry was also much lower before 1984. Excluding antibiotics and drugs approved before 1962 (for which an abbreviated generic-drugapproval process existed), only 18 out of 52 top-selling drugs with expired patents had generic versions available." Clearly, the lengthy FDA approval process at that time hampered the generic drug industry. Effect of Generic Entry on Brand-Name Prices Those consumers who are more sensitive to price, or who are covered by health plans that encourage generic substitution, are more likely to buy a generic drug when it becomes available. As the more pricesensitive consumers switch to the generic version, demand for the original brand-name drug declines and may become less sensitive to price. If that happens, the price of the brand-name drug could theoretically rise more quickly over time than it would have without generic competition.56 A number of empirical studies have found that the prices of brand-name drugs continue to rise faster than inflation after generic entry (see Box 4 for details). One study also found that brand-name prices increase by about 1 percent with each new generic competitor. At the same time, CBO's analysis shows that discounts on brand-name drugs tend to increase after generic entry, something not fully captured in the invoice prices on which the other empirical studies are based. CBO found that the best-price discount is 10 to 17 percentage points gr...