PostPoems Be Artistic. Be Creative. Be Inspired!

Generic drugs have been hailed for the impact they have had on the United States healthcare industry. These group of medicines has ensured that Americans have access to affordable yet qualitative prescription medicine, thereby ensuring improved healthcare delivery.

At its most basic, a generic drug is a copy or replica of a brand-name drug, dispensed with the same dosage, intended use, effects and side effects, route of administration, risks, safety, and strength as the original (patented) drug. Unlike the original medication, a generic drug enters the market at much less a cost compared to that for a brand name due to lower production costs and less stringent regulatory approval routes/paths.

These characteristics of a generic drug mean that the market teems with a lot of producers of this brand of medicine. That many players mean that competition is steep in the generic drug market. And this competition is put putting downward pressure on the pricing of generic drugs in the market. The latest quarterly results of two leading generic drug manufacturers, Impax and Perrigo, lay credence to the fact. These companies missed revenue expectations by at least 20 percent. Overall, the generic drug sector anticipates that prices will fall by as much as 9 percent in the current year. Some enthusiasts also opine that generic drug prices will continue to experience accelerated deflation in the first half of 2017.

This brings us to the question of why is the case with the pricing mechanism of generic medicine in the United States and the rest of the world.

Reasons

It is important to note that US Food and Drug Administration (FDA) has made generic medicine production/facilitation as well as market price equalization, one of its key focuses. So if generic drugs receive such enormous official goodwill, why does a downward spiral in price still occur?

We may need to look at the kind of generic medications that obtain regulatory approval in the first place. The number of Abbreviated New Drug Applications (ANDAs) which are termed ‘first timers’ has steadily decreased over the years. A first time ANDA is a generic medicine made from an original that had no copies before. In other words, the FDA is approving more generics in a market already brimming with similar copycats and fewer approvals going out for innovator generic medicines. Simple Economic logic shows that the more available a product/service is, the lower the cost of the product/service in question.

Another factor in falling generic drug pricing borders on the activities of wholesalers. These actors wield influence by engaging in a pricing war, by offering better pricing to pharmacies, rather than to national supply chains. At the same time, these wholesalers also arm twist drug manufacturers into giving them better bargains on drug pricing.

A way out?

A plausible solution to stemming the tide of falling generic drug pricing might lie in innovation. But that seems highly unlikely given the nature of the generic drug industry. A more practical (workable) solution looks to be generic drug manufacturers coming together to consolidate the market. This consolidation could eventually make the market attractive and profitable enough for investors to provide additional funding and improved capacity.