The Reality Behind Generic Drug Inflation

Dec 30, 2014
The Express Scripts Prescription Price Index shows that, since 2008, the average price of brand drugs has almost doubled, while the average price of generic drugs has been cut roughly in half.

Price inflation among a few generic drugs has been in the news lately, but it really isn’t a new phenomenon. There are similar examples of this happening over the past decade.

Inflation Drivers

In the instances when a generic drug experiences price inflation – in this year and in previous years – primarily two market factors are in play:

  • Manufacturer consolidation. When fewer manufacturers make a specific generic, the industry is less equipped to absorb a disruption at one of those facilities.
  • Temporary shortages of active ingredients, due to demand or regulatory requirements or actions. This was the case with ADHD medications in 2011, and the antibiotic doxycycline last year.

Just four medications have accounted for the most significant generic price increases in 2014: digoxin for congestive heart failure, ursodiol for gallstones, hydrocortisone acetate for inflammation and clobetasol propionate for eczema and psoriasis. Digoxin had the largest 2014 price increase – 1,127% – because for a while only, two manufacturers were producing this widely-used medication.

The Persistent Value of Generics

Even with this isolated price inflation, generic medications overall continue to deliver significant savings over brand-name alternatives. The Express Scripts Prescription Price Index shows that, since 2008, the average price of brand drugs has almost doubled, while the average price of generic drugs has been cut roughly in half.

Prescription Price Index 2013 

Why All the Talk Now?

In an effort by plan sponsors to keep annual premiums affordable for their members, there has been greater adoption in recent years of higher-deductible, consumer-driven health plans. By design, these plans offer lower premiums but expose patients more to the impact of temporary changes in drug prices.

Mitigating the Risk of Generic Drug Price Inflation

Express Scripts takes every step necessary to mitigate the risk of drug price inflation for our clients and members. And we have a task force of clinical experts currently assessing what additional measures may be possible.

While news reports focus on a few outliers, payers should remain confident that, on the whole, generic medications continue to deliver significant cost savings. Encouraging use of generics over more expensive brand alternatives, when clinically appropriate, keeps costs down and helps patients adhere to their prescribed therapy.

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