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Generic drugs drive down prescription prices for Medicare patients

Although net prices for brand-name drugs have risen dramatically over the past decade, savings from generics have actually lowered average prescription prices in Medicare and Medicaid drug benefits, according to new analysis from Congressional Budget Office.

Why is this important: The analysis reminds us that the generic market is working largely as expected.

By the numbers: The average net price of a prescription fell from $57 in 2009 to $50 in 2018 in Medicare Part D, and from $63 to $48 in Medicaid.

  • The decline is largely attributable to the growing use of generics, which rose from 75% to 90% of all prescriptions nationwide during this period. The average price of a generic prescription also fell in both programs.
  • But the average net price of brand-name prescriptions more than doubled in Part D and rose 50% in Medicaid, the analysis found. These increases were driven by higher introductory prices for new drugs and price increases for drugs already on the market.
  • The higher introductory prices are due in part to more specialty drugs entering the market.

Yes, but: The analysis focused on drugs sold in pharmacies, not drugs administered in hospitals or doctors’ offices, which tend to be more expensive and have different market dynamics.

  • And the analysis notes that the share of total prescriptions that are generic may not continue to grow in the same way in the future, in part “because new branded drugs tend to be more expensive to manufacture and can be more difficult to reproduce as generic drugs”. medications.”

The big picture: The Democrats’ legislative agenda — including the party’s effort to lower prescription drug prices — has stalled in the Senate.

  • But the provisions allowing Medicare to negotiate drug prices would only apply to insulin and certain drugs without competition, which would largely exclude the generic market.

The bottom line: “A reasonable interpretation of this data is that we have a targeted drug pricing problem, not a general problem,” said Ben Ippolito of the American Enterprise Institute.

Joan J. Dean

The author Joan J. Dean