How Generics Lower Drug Prices

The popular furor over rising drug prices has led to increased scrutiny of the patent protections that can allow drugmakers to sell medicines exclusively for many years. A new study helps quantify just how much a generic competitor can drive down the price of a brand name drug.

The price of brand name drugs falls steeply in the first year after the loss of exclusivity and continues to fall over the next three years, according to a study published by the IMS Institute for Healthcare Informatics with numbers from IMS Health, a medical data wholesaler. The study mapped the percent decrease in price against the months since the drugs lost exclusivity. A survey of 428 products found that the price of brand name drugs fell by 51 percent in the first year that a generic was available. The price of oral medicines saw an even more dramatic dip — falling 66 percent in the first year.