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Two Generic Drugs Lower Prices More Than One Does

April 05, 2006|From Bloomberg News

When two competing generic drugs come on the market, the average generic price can drop to half the cost of the comparable brand-name product, according to a U.S. government study released Tuesday.

The study by the Food and Drug Administration found that savings weren't as significant when only one generic drug was on the market: the price of the generic drug is typically 6% less than the brand-name competition.

"It's purely the economics of supply and demand," said Ivan Feinseth, director of research at Matrix USA. "All it takes is one competitor to have a price war."

The FDA is facing criticism from lawmakers who say the agency is taking too long to approve generic drugs, resulting in higher consumer costs. The FDA recently said it had a backlog of more than 800 applications to produce new generics.

The FDA study, based on an analysis of retail prices from 1999 through 2004, found that more competition among generic drugs gradually reduces the price per dose. The price reductions were more gradual after the second generic was introduced.

When nine generic manufacturers were competing with each other, the average price was 80% less than the comparable brand-name drug.

To compete with makers of generic drugs, big pharmaceutical companies have been allowing so-called authorized generics, cheaper copies approved by companies that developed the original drugs. The Federal Trade Commission said last week that it was looking into whether consumers were being hurt by that practice.

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