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Generic drug prices falling

Discount prescriptions from retail giants and a sales battle among manufacturers have lowered costs in U.S.

December 11, 2008|associated press

TRENTON, N.J. — Finally, a little good healthcare news for consumers: U.S. prices for generic prescription drugs, which already cost as little as one-third what their brand-name cousins do, have been getting cheaper and probably will keep doing so.

The causes? The ultra-low prices for generic prescriptions offered by giant retailers and drugstore chains and intense competition among the many generic drug makers fighting for sales, according to health information firm IMS Health Inc.

Those pricing pressures forced down dollar sales of generic drugs in the U.S. by 2.7% in the year ended in September, even though the number of generic prescriptions filled actually increased 5.4% over the year before, IMS reported Wednesday.

"We're seeing the combination of pressure from large retailers to make generics available at ever-lower prices for their customers" and the intensified competition among generic drug makers leading them to cut prices, said Murray Aitken, senior vice president of the Healthcare Insight unit at IMS.

Aitken said the price competition was particularly intense for drugs that had been brand-name blockbusters -- recent examples include osteoporosis drug Fosamax and cholesterol fighter Zocor -- where "there can be as many as 20 generic manufacturers competing for share."

In May 2006, discounter Kmart Corp. started the trend with 90-day supplies of popular drugs for $15, followed by $4-per-month programs from Wal-Mart Stores Inc. and Target Corp. The idea was to pass on their savings from buying in large volume as a strategy to draw more shoppers into their stores.

Some other major retailers with in-store pharmacies and even drugstore chains have followed suit with similar programs, with some now offering generic drugs for as little as $10 for a three-month supply.

"I think we'll continue to see very intense levels of competition" in the U.S., Aitken said. "It's a very good story for the healthcare system."

And more popular generics will be coming soon.

IMS noted that between now and 2012, brand-name drugs with $139 billion in annual sales in the world's top eight markets would face generic competition. Those drugs include the world's top-selling medicine, Pfizer Inc.'s cholesterol drug Lipitor, which has sales of nearly $13 billion a year.

But after that, the continuing decline in the number of major new brand-name drugs being approved will mean fewer new generics.

Generics generated $78 billion in revenue in the 26 countries with the highest sales in the year ended in September, an increase of only 3.6% over the prior year, according to IMS. Revenue had been climbing by double digits for several years and jumped 11.4% in 2007.

The report noted that U.S. generic sales fell to $33 billion in the year ended in September from $34 billion in 2007. Generic drugs accounted for nearly 64% of all prescriptions filled.

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