AARP: Annual generic prices declines are slowing

Latest study shows an overall 4% price decline in 2013 for a basket of drugs used by seniors

While leading with a repeated notation of a generic drug whose price has risen by over 1,000%, the Public Policy Institute of AARP (Washington, DC) reports that overall, generic prices declined by 4% in 2013 for a group of 280 drugs commonly used by seniors. In that year and in that group, there were 73% price decreases, and 27% price increases. A declining average has been the norm for many years, but as AARP notes, the 4% decline is the smallest in recent years and, given the price increases generally recognized during 2014, might be disappearing altogether. “Declining generic drug prices have helped many Americans' pocketbooks, particularly older adults on fixed incomes,” noted Debra Williams, PhD, AARP EVP for policy.

Historically, generic pricing over time falls to around 10% of the cost of the branded innovator drug, and distribution channels are set up to take advantage of that price decline, as well as the year-by-year drop. It’s not widely recognized, but generic prices in the US are among the lowest of any industrialized nation. At the same time, the severe price pressure on generics stresses manufacturers, who, it is believed, are forced to scrimp on maintaining modern manufacturing technology (much of which is located abroad). The pharma supply chain has suffered an ongoing crisis in shortages of key drugs, some of which are available only from one or two manufacturers. (The countervailing force to this trend is FDA’s efforts to raise overall quality of pharma products which, in turn, is pointed to as a reason for price increases.)

AARP Public Policy Institute worked with the Prime Instittue at the Univ. of Minnesota, and retail pricing data from the Truven Health MarketScan Research Database, to compile the report, which is available here.