Health Insurance Daily

Generic Scrip Share And The Price Of Brand-Name Drugs: The Role Of The Consumer

According to the National Bureau of Economic Research, generic drug utilization has risen dramatically, from 19% of scrips in 1984 to 47% in 2001, thus bringing significant direct dollar savings.

Generic drug use may also yield indirect savings if it lowers the average price of those brand-name drugs that are still purchased. Prior work indicates - and we confirm - that generic competition does not induce brand-name producers to lower prices.

However, consumer choices between generic and brand-name drugs could affect the average price of those brand-name drugs that are purchased.

We use nationally representative panel data on drug utilization and costs for the years 1996-2001 to examine how the share of an individual's prescriptions filled by generics affects his average out-of-pocket cost for brand-name drugs.

Our principal finding is that a higher generic scrip share lowers average brand-name prices to consumers, presumably because consumers are more likely to substitute generics when the price gap is great.

This effect is substantial: a 10% increase in the consumer's generic scrip share is associated with a 15.6% decline in the average price he pays for brand-name drugs.

posted by Mike @ 12:50 PM