High Generic Drug Prices and Market Competition: A Retrospective Cohort Study.

BACKGROUND

Prices for some generic drugs have increased in recent years, adversely affecting patients who rely on them.

OBJECTIVE

To determine the association between market competition levels and the change in generic drug prices in the United States.

DESIGN

Retrospective cohort study.

SETTING

Prescription claims from commercial health plans between 2008 and 2013.

MEASUREMENTS

The 5.5 years of data were divided into 11 study periods of 6 months each. The Herfindahl-Hirschman Index (HHI)-calculated by summing the squares of individual manufacturers' market shares, with higher values indicating a less competitive market-and average drug prices were estimated for the generic drugs in each period. The HHI value estimated in the baseline period (first half of 2008) was modeled as a fixed covariate. Models estimated price changes over time by level of competition, adjusting for drug shortages, market size, and dosage forms.

RESULTS

From 1.08 billion prescription claims, a cohort of 1120 generic drugs was identified. After adjustment, drugs with quadropoly (HHI value of 2500, indicating relatively high levels of competition), duopoly (HHI value of 5000), near-monopoly (HHI value of 8000), and monopoly (HHI value of 10 000) levels of baseline competition were associated with price changes of -31.7% (95% CI, -34.4% to -28.9%), -11.8% (CI, -18.6% to -4.4%), 20.1% (CI, 5.5% to 36.6%), and 47.4% (CI, 25.4% to 73.2%), respectively, over the study period.

LIMITATION

Study findings may not be generalizable to drugs that became generic after 2008.

CONCLUSION

Market competition levels were associated with a change in generic drug prices. Such measurements may be helpful in identifying older prescription drugs at higher risk for price change in the future.

PRIMARY FUNDING SOURCE

None.