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Drug Prices and Generic Competition

Copyright © DrugPatentWatch. Originally published at Drug Prices and Generic Competition

You would be surprised to find out just how many questions are answered by the analysis of the relationship that emerges between generic competition and drug prices. 

For manufacturers and suppliers but just as much for consumers that have some sort of involvement in the drugs industry, it is of great advantage to understand the inner workings of the industry in question.

And perhaps the very first matter of interest at the mention of generic competition is the way in which it shapes out drug prices. In this sense, it is usually the case that generic competition is seen as a modifying element that creates the opportunity for lower drug prices.

How generic drugs influence the market

generic drug marketsThe basic idea is that when a second generic competitor, for instance enters the market, there is a cause for a significant drug price reduction. Logically then, it stands that if more and more generic drugs enter the market the prices will decline in a major way. 

The biggest, most noticeable shift in price manifests in the cases in which for a long time there was a single manufacturer who was then joined by the entry of a new generic drug. These kinds of scenarios generally end with prices being cut down even to the half of their initial cost. And although the entry of new generic drugs will, naturally, continue to lower the prices, it will occur at a much slower rate. 

As records show, the number of generic drugs entering the market nowadays is on the rise. In this sense, generic drugs make up around 90% of prescriptions as compared to the mid-1990s when the percentage was lower than 20%.

Due to the FDA having significantly gained more authority over time as well as being able to access substantial resources in order to address the new generics entering the market, competition in the drug industry is now perhaps more active than ever. And as a consequence, prices fluctuate just as much. 

That being said, when it comes to costs, it is generally biologic drugs that constitute the main element that drives them up. And again the only way to have prices kept in check would be to encourage more biosimilar competition.

Generics awareness and drug prices

drug pricesThe reality is that physicians are in most cases reluctant in prescribing generics that they didn’t have the time to familiarise themselves with properly. 

The circumstances are especially challenging in the field focusing on psychiatric disorders, for instance, where doctors are especially insistent on finding alternatives that are an exact match for their patients. 

Therefore, if the generics, even after having entered the drug market, are not in demand, they stand no chance of actually remaining relevant in the market long enough to represent competition to the drugs put out by brands. 

It’s important, thus, for manufacturers of generics to not be deluded into thinking that managing to enter the markets represents a guaranteed victory of their product’s relevance in the drugs industry, but to understand the fact that their next steps are arguably even more crucial. 

Concentrating on the promotion of the newly-approved generics is of utmost importance should the product secure its place. It is only in this way that generics stand a real chance at adding to the competition. 

Therefore, further investing in commercializing the product after it has made its way into the market is a necessity, and not an option if the efforts to get the product on the market are to be rewarded in any significant way.

The matter of fact is that the conditions that define the entry on the market of new generic drugs have been and continue to be under constant watch and regulation for the purpose of speeding the process up as much as possible. 

The ultimate goal is to prevent or reduce skyrocketing prices coming from name brand manufacturers by enlarging the pool of competing generic drugs. 

In this sense, ever since 2017 when new regulations were passed under the Food and Drug Administration Reauthorization Act, otherwise known as the FDARA, more and more funds have been directed towards the consolidation of regulatory efforts, aiming at improving the process of getting pharmaceutical products into the market. 

That being said, one of the most pronounced changes is the reduction of the time spent by experts reviewing the new generic drugs and deeming them suitable to enter the market or, alternatively, in need of more extended study. In addition to this, it should also be stated that whenever new generic drugs do not rise to the required standards, it is not to be regarded as a failure or as wasted efforts. 

In fact, initial rejection from entering the market is a pretty common occurrence with generic drugs with records showing that approximately 80% of the proposed generics do not get approved on the first attempt. 

The bright side of this is that in most cases the review that the product underwent serves to inform the concrete steps that can be taken in order to improve the quality factors that made the product inadequate on its first try of entering the market. 

Generic competition and drug prices are inevitably linked, with one ending up conditioning the other. Thus, the more generics enter the markets, the lower the prices, and, by contrast, the more the exclusivity a product enjoys, the higher the costs of acquiring it is. 

And although the whole process seems to be running on capitalism’s chief principle i.e. supply and demand, there are quite a few nuances specific to pharmaceuticals that can come in handy for a business trying to navigate through the drug industry. 

To remain competitive you need to anticipate what’s next. DrugPatentWatch understands and works together with you to help you make better decisions. To learn more about how new generics entering the drug market modify the existing medication prices, you can reach out to us and we’ll help you sort it out.


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Copyright © DrugPatentWatch. Originally published at Drug Prices and Generic Competition
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