Falling prices for generic pharmaceuticals

We find the chained direct-out-of-pocket CPI for generic prescription drugs declines by about 50% between 2007 and 2016, while the total CPI [what the dispensing pharmacy receives, the difference being generated by co-pay rates] falls by nearly 80% over the same time period. The smaller decline in the direct out-of-pocket CPI than in the total CPI is due in part to consumers’ increasingly moving away from fixed copayment benefit plans to pure coinsurance or a mixed package of coinsurance and copayments. While consumers are experiencing more cost sharing that in fact shifts more of the drug cost burden on to them, on balance in the US consumers have experienced substantial price declines for generic drugs.

That is from a new NBER working paper by Richard G. Frank, Andrew Hicks, and Ernst R. Berndt.