Generic Drug Price Hikes And Out-Of-Pocket Spending For Medicare Beneficiaries

Abstract

Recent increases in prices of longtime generic drugs have focused attention on competition in generic markets. We used Medicare Part D data for the period 2006-15 to examine sudden large price increases in generic drugs in the context of their base prices, duration, and accompanying changes in patients' out-of-pocket spending. The fraction of drugs that at least doubled in price increased from 1.00 percent of generic products in 2007 to 4.39 percent in 2013. Almost all were initially low- or medium-price medications and not among the most widely used generics. Changes in out-of-pocket spending for these drugs were modest. However, the elevated prices persisted for two to five years. Data for 2011-15 showed similar trends. Potential steps to ensure that generic markets remain strong include fast-tracking new generic drug applications when competition is limited, allowing temporary importation of off-patent drugs, and implementing greater oversight of drug company mergers and takeovers.

Keywords: Drug Pricing; Generic Drugs; Medicare Part D.