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    The ups and downs of generic drugs

    Generic cost savings continue, but so do shortages

    The generic landscape is shifting. What was once a progression of inevitable price cuts as patents expired has become more nuanced. The pool of generic players is shrinking and the cast of winners and losers is shifting. In the race to rock-bottom prices, prices for some difficult-to-manufacture products have already crashed and are rebounding higher. Current trends in patent expirations, utilization, and market forces are creating a complex pattern of product introductions, product shortages, price cuts, and price increases that will continue to unfold over the next five years.

    A key role

    Generics are still a good deal. But the deal is changing as the generic industry matures and consolidates, and as generic drugs reach their maximum saturation point. Most generic prices will continue to fall. Some, however, will rise: A few have already soared 1,000% and more.

    Adam FeinAdam Fein“We don’t have as many high-profile drugs going generic,” said industry analyst Adam Fein, PhD, President of Pembroke Consulting. “And in some generics, we have a very fragile supply chain, with just one or two suppliers. If there is any disruption in manufacturing, you have a shortage and increasing prices.”

    Michael KleinrockMichael KleinrockGenerics play a key role in health care. And that is not likely to change. The IMS Institute for Healthcare Informatics found that nearly every therapeutic class and disease state now has at least one generic among first-line treatment alternatives. IHI’s April 2014 report, “Medicine Use and Shifting Costs of Healthcare,” found that generics now represent 86% of all prescriptions filled in the United States, an all-time high.     

     “In the next five years, another 5% of the remaining branded prescriptions will lose exclusivity and convert to generic,” said IMSIHI Executive Director Michael Kleinrock. “We see 91% to 92% generic penetration, with 8% or 9% of remaining branded products. The challenge is being able to make those generic products to a high standard at a profit.”

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