The Good News on Generic Drugs

Who could resist the story of Martin Shkreli and Turing Pharmaceuticals?  Shkreli is like a villain straight from central casting; having made millions, perhaps fraudulently, as a hedge manager, he turned to pharmaceuticals where, as CEO of Turing, he bought up the marketing rights to Daraprim (pyrimethamine), a drug used by pregnant women and AIDS patients (natch), and jacked up the price from $13.50 a pill to $750 a pill. Not content with monopolizing pharmaceuticals, Shkreli also aimed to monopolize hip hop music. Shkreli on his own was a great story but add some big price increases for a handful of other generic drugs and Shrekli became an irresistible lead to a story about seemingly widespread increases in generic drug prices.

If we dig deeper, however, the big news about generic drugs is good news. Generic drug prices are falling. Three recent studies of generic drug prices all point in the same direction. Express Scripts, a large prescription drug manager, found that:

From January 2008 through December 2014, a market basket of the most commonly used generic medications decreased in price by 62.9%.

In an excellent overview the Department of Health and Human Services concluded that:

…drug acquisition costs fell for a majority of generic Medicaid prescriptions measured by both volume and total generic expenditures.

Finally the AARP studied the prices of generic drugs used by older Americans and found that:

Between January 2006 and December 2013, retail prices for 103 chronic-use generic drugs that have been on the market since the beginning of the study decreased cumulatively over 8 years by an average of 22.7 percent.

— The cumulative general inflation rate in the U.S. economy rose 18.4 percent during the same 8-year period.

Patented drugs are increasing in price so to evaluate the benefit of price decreases for generics it’s important to know that between 80 to 90 percent of all prescriptions in the United States are for generic drugs.

Tomorrow: The Good News on the FDA and ANDAs.

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