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Context: Rising drug prices are putting pressure on health care budgets. Policymakers are assessing how they can save money through generic drugs. Methods: We compared generic drug prices and market shares in 13 European countries, using data from 2013, to assess the amount of variation that exists between countries. To place these results in context, we reviewed evidence from recent studies on the prices and use of generics in Europe and the United States. We also surveyed peer-reviewed studies, gray literature, and books published since 2000 to (1) outline existing generic drug policies in European countries and the United States; (2) identify ways to increase generic drug use and to promote price competition among generic drug companies; and (3) explore barriers to implementing reform of generic drug policies, using a historical example from the United States as a case study. Findings: The prices and market shares of generics vary widely across Europe. For example, prices charged by manufacturers in Switzerland are, on average, more than 2.5 times those in Germany and more than 6 times those in the United Kingdom, based on the results of a commonly used price index. The proportion of prescriptions filled with generics ranges from 17% in Switzerland to 83% in the United Kingdom. By comparison, the United States has historically had low generic drug prices and high rates of generic drug use (84% in 2013), but has in recent years experienced sharp price increases for some off-patent products. There are policy solutions to address issues in Europe and the United States, such as streamlining the generic drug approval process and requiring generic prescribing and substitution where such policies are not yet in place. The history of substitution laws in the United States provides insights into the economic, political, and cultural issues influencing the adoption of generic drug policies. Conclusions: Governments should apply coherent supply- and demand-side policies in generic drug markets. An immediate priority is to convince more physicians, pharmacists, and patients that generic drugs are bioequivalent to branded products. Special-interest groups continue to obstruct reform in Europe and the United States.

State Medicaid programs cover nearly all Food and Drug Administration-approved prescription drugs in exchange for mandatory manufacturer rebates, including rebates that offset price increases beyond inflation. These inflationary rebates originally applied to brand-name drugs only, but in 2017 Congress expanded them to include generics. Using public Medicaid medication spending and utilization data and three different measures of drug prices, we found that nearly half of generic drugs were subject to inflationary rebates during the period 2017-20, offsetting 2-12 percent of the $53.6 billion in generic drug spending during that time. Rebates were larger among non-orally administered drugs and those with the highest prices. Generic inflationary rebates offset substantial Medicaid spending during that period, suggesting that many generic prices increased above inflation despite the new policy. This might change now that inflationary rebates have been expanded to Medicare under the Inflation Reduction Act of 2022, although additional policies that ensure competitive markets would better protect all US patients from rising generic drug prices.

Inhalers are the mainstay of treatment for asthma and chronic obstructive pulmonary disease (COPD). These products face limited generic competition in the US and remain expensive. To better understand the strategies that brand-name inhaler manufacturers have employed to preserve their market dominance, we analyzed all patents and regulatory exclusivities granted to inhalers approved by the Food and Drug Administration between 1986 and 2020. Of the sixty-two inhalers approved, fifty-three were brand-name products, and these brand-name products had a median of sixteen years of protection from generic competition. Only one inhaler contained an ingredient with a new mechanism of action. More than half of all patents were on the inhaler devices, not the active ingredients or other aspects of these drug-device combinations. Manufacturers augmented periods of brand-name market exclusivity by moving active ingredients from one inhaler device into another (device hops). The median time from approval of an originator product to the last-to-expire patent or regulatory exclusivity of branded follow-ons was twenty-eight years (across device hops on fourteen originator products). Regulatory and patent reform is critical to ensure that the rewards bestowed on brand-name inhaler manufacturers better reflect the added clinical benefit of new products.

Biologic drugs account for a disproportionate share of the increase in pharmaceutical spending in the US and worldwide. Against this backdrop, many look to the expanding market for biosimilars- follow-on products to biologic drugs-as a vehicle for controlling pharmaceutical spending. This study explores the early years of entry of biosimilars and related follow-on products in the US. Using monthly sales data from the period 2005-19 for ten drug classes, we examine how quickly biosimilars/follow-on products gained market share and the subsequent trajectory of prevailing (national average invoice) prices. Our analysis suggests that although uptake has been slower than what is typically seen in generic drug markets, the most recent entrants have captured market share more rapidly than comparable earlier biosimilars/ follow-on products. We also document that from biosimilar/follow-on products' time of entry, their lower prices help offset the overall trend in average annual reference-product price increases. Our findings can provide insight into future policy reforms aimed at increasing competition and use of biosimilars, leading to expanded patient access and significant cost savings.

Authorized generics are approved brand-name drugs that are sold by brand-name manufacturers or licensees without brands on their labeling. Despite their prevalence in prescription drug markets in the US, little is known about trends in their launches, their timing relative to traditional generics, and the characteristics of their respective brandname drugs. We linked Food and Drug Administration and IQVIA data to investigate newly launched authorized generics during the period 201019. We found 854 launches over this period, with launches peaking in 2014. Marketing appears strategic: In markets with traditional generics, three-fourths of authorized generics launched after the respective generic competition started. When we focused on markets where generics were eligible for the 180-day exclusivity, about 70 percent of authorized generics launched before or during the exclusivity period. These findings provide insights for future research on the effect of authorized generics on competition, prices, and access to generics.

Policy Points Much concern about generic drug markets has emerged in recent policy debates. Important changes in regulations, the structure of purchasing, and the length of the drug supply chain have affected generic drug markets. Effective price competition remains the rule in generic markets for large‐selling drugs. Smaller markets and those for injectable products often have less price competition and are more susceptible to supply disruptions. Context The image of generic drugs as a commodity sold in competitive markets is an oversimplification, as evidenced by increasing accounts of price spikes, sustained high price‐cost margins, and market disruptions. The mismatch between the canonical economic model of generic drug markets and reality motivated our empirical project. Methods To explore recent changes in those factors impacting the supply and demand for generic drugs, we studied, from a variety of sources, the data on price, competition, supply disruptions and recalls, changes to the supply chain, and buy‐side concentration. We examined quarterly data through 2018 for a cohort of 77 molecules that lost patent protection during the so‐called patent cliff between 2010 and 2013. Findings On the supply side, we found that for large‐market oral solids, generic entry and price declines were consistent with past studies showing a significant number of market entrants and substantial reductions in the average price of a molecule. In smaller markets for oral solids and injectable products, we observed fewer entrants, higher rates of exit, smaller price reductions, and, in some cases, considerable price instability. The number of reported shortages increased across all generic market types over time, with the rate of shortage increases especially pronounced in markets for injectable products. The number of product recalls also rose over our study period. Although we did not estimate causal effects, we did find several changes in the market environment for generic drugs that may contribute to these phenomena. The demand side for generics has become more concentrated. Supply chains rely more on producers outside the United States (particularly from China and India). Contracting practices have undergone changes that may inhibit competition in product supply. FDA regulatory scruitiny has increased. Conclusions Competition in generic drug markets varies widely by market size and product form. Recent changes in demand‐side market structure imply more downward pressure on prices stemming from buy‐side concentration. The FDA's greater regulatory oversight puts upward pressure on costs, and the lengthening of the supply chain increases production uncertainty for producers. Demand and supply‐side changes point to further market instabilities across all generic markets due to producers’ changing economic position.

It is unknown to what extent rising drug costs are due to inflation in the prices of existing drugs versus the entry of new products. We used pricing data from First Databank and pharmacy claims from UPMC Health Plan to quantify the contribution of new versus existing drugs to the changes in costs of oral and injectable drugs used in the outpatient setting in 2008-16. The costs of oral and injectable brand-name drugs increased annually by 9.2 percent and 15.1 percent, respectively, largely driven by existing drugs. For oral and injectable specialty drugs, costs increased 20.6 percent and 12.5 percent, respectively, with 71.1 percent and 52.4 percent of these increases attributable to new drugs. Costs of oral and injectable generics increased by 4.4 percent and 7.3 percent, respectively, driven by new drug entry. The rising costs of generic and specialty drugs were mostly driven by new product entry, whereas the rising costs of brand-name drugs were due to existing drug price inflation.

The US supply of generic drugs is heavily dependent on the global supply chain for sources of generic active pharmaceutical ingredients (APIs) for the US pharmaceutical market. Data from Clarivate Analytics' Cortellis Generics Intelligence database were analyzed to perform a systematic examination of generic APIs produced globally for the US market during 2020-21. We identified a total of 565 facilities producing 1,379 unique generic APIs across forty-two countries. India, China, and Italy were the top producers; 14 percent of APIs were manufactured in the US. About a third of APIs were manufactured by a single facility, and another third were manufactured by two or three facilities. More than one in every five APIs reflected markets in which current Food and Drug Administration standards would have failed to detect low competition because there were three or fewer API manufacturers despite there being four or more manufacturers of finished generic drugs. Monitoring the API supply is crucial to identifying vulnerabilities in the US pharmaceutical supply chain and identifying drugs that could represent potential priorities for domestic production. Incentives in the US may be needed to support API production to safeguard against supply-chain disruptions.

The standard Medicare Part D drug insurance contract is non-linear—with reduced subsidies in a coverage gap—resulting in a dynamic purchase problem. We consider enrolees who arrived near the gap early in the year and show that they should expect to enter the gap with high probability, implying that, under a benchmark model with neoclassical preferences, the gap should impact them very little. We find that these enrolees have flat spending in a period before the doughnut hole and a large spending drop in the gap, providing evidence against the benchmark model. We structurally estimate behavioural dynamic drug purchase models and find that a price salience model where enrolees do not incorporate future prices into their decision-making at all fits the data best. For a nationally representative sample, full price salience would decrease enrolee spending by 31%. Entirely eliminating the gap would increase insurer spending 27%, compared to 7% for generic-drug-only gap coverage.

Although generic drugs are typically inexpensive, rising prices among some generic drugs in recent years have raised concern. Using Medicaid data, we found that one in five generic drugs sold in the US experienced a price spike (defined as a doubling in price over the course of one year) initiated by at least one manufacturer during the period 2014–17. There was a trend toward fewer price spikes each year, from 7.8 percent of drugs in 2014 to 5.8 percent in 2017. Among drugs experiencing price spikes, 51 percent were injected products, 64 percent had three or fewer manufacturers, and 18 percent were in shortage at the time of the spike. Generic drug price spikes cost Medicaid $1.5 billion during 2014–16, representing 4.2 percent of all Medicaid generic drug spending in that period. The trend toward fewer price spikes over time may be due to increased public scrutiny and regulatory actions. However, price spikes can be very costly, and additional policies are needed to both ensure adequate competition and control prices among generic drugs.