Policy Generic Drug Prices Are Falling, but Are Consumers Benefiting?

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From the NYTimes and ProPublica:

Generic Drug Prices Are Falling, but Are Consumers Benefiting?

An interesting finding:

article said:
The declining prices are broadly beneficial to the health care system, and may put some slight brake on rising premiums.

But most of those with health insurance pay a fixed co-payment — $10, for example — for each generic prescription, and therefore don’t pay more or less, regardless of any fluctuation in the actual price. And even those who pay cash for generics may not notice a drop in price because many are already cheap.

What are your thoughts?

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generic drug prices only go down, unless something unnatural causes a sudden shortage or recall. Because companies do not have to spend money on direct-to-consumer marketing (the US is the only industrialized country that allows pharma companies to market directly to consumers) and because drug prices in the US are negotiated for individually by each insurance provider and not by a singe, large collective provider (like in countries with single player; medicare is also banned by law from negotiating drug prices, except for Medicare Part D and the VA), setting fixed prices for generic drugs ensures that profits for generics always go up even tho prices always go down.

pharma companies spend a fortune on direct-to-consumer marketing for name-brand drugs. Cant set fixed price for those, because you dont know how much money you have to throw at a new or existing drug to grow its market share when it hits market (also, bringing drugs to market in the US is more expensive than in other countries, for several reasons). Furthermore, name-brand drug prices are less stable once a generic or cheaper alternative becomes available, which is just a matter of time. So those prices need to be negotiated to ensure that your investors can continue to make profit.

as a clarification, of course generic prices do go up (not just down), what I mean is that the cost of producing generics only goes down, so the cost for the producer is always going down. The market price of course depends on competition and other market conditions. That price might be going down now but IIRC they spiked a few years ago. Negotiation for drug prices favors drug producers in the US and not buyers, since buyers are diffuse and numerous.

nothing in American healthcare makes any sense if you think about health, but if you think about profits, it's quite an impressive machine. but that's just, like, my opinion man. Be interested to hear what others have to say since this is just my initial reaction as to why this might be the case.

tl;dr: production costs are more stable for generics and beneficial for the company in the long run and marketing costs are far, far lower. Therefore, it is in the interest of drug sellers to negotiate fixed prices to ensure profits go up as production costs go down. Can't do the same as reliably with name-brand drugs.
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Generic Drug Price Slump's Latest Victim: Mylan Profit Goal

NYTimes article said:
Is this trend likely to continue?

Generic manufacturers say they expect it will, and are worried that lower prices could put pressure on profits and threaten the viability of the companies. This could lead to a wave of mergers and acquisitions, reducing competition and leading to higher prices.

David Maris, an analyst for Wells Fargo, dismissed the idea that companies would go out of business. “Right now we have a very healthy generic market,” he said.

The new commissioner of the Food and Drug Administration, Dr. Scott Gottlieb, has made increased competition in the drug market a key part of his policy platform. He said he wanted to make it easier for the generics manufacturers to get clearance for hard-to-copy products like eye drops, topical creams and asthma inhalers. And he wants to reduce barriers to ensure new players can enter the market for existing generic drugs, possibly lowering prices further.

“We’re looking to create competition where there isn’t competition,” he said.
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Customers aren't benefiting because plan benefit design do not reflect cheaper costs by drugs. The drugs are categorized by tiers and typically you pay a set $ per tier. Now as more expensive specialty meds are released, the lower costs of generics would at best offset the higher costs of specialty meds for the PBM / drug plan. That's why, among other reasons, overall drug spending is staying stable rather than skyrocketing.
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