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

Abstract

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.