How Generic Prices Drop With Number of Manufacturers

Here’s another great analysis by my friends at Barclays Capital (contact Meredith Adler). It’s amazing to see the correlation of these two variables:

It begs the question of why those last few manufacturers get into the market.

Alan Bronfein Reply November 21, 2010 at 10:15 am

I am curious as to your thoughts about the introduction of high cost brands going generic and their impact on generic price inflation. Think about the chart above and Aricept. Generic price inflation has been under 1%, however, there are a significant # of products converting over the next couple of years that should drive the avg Generic cost/Rx up significantly..Aricept, Lipitor, Lovenox, Advair, Seroquel, Zyprexa, etc..With the increased FDA scrutiny, plant closings, API shortages etc these all could lead to Generic INFLATION vs the general deflation we have seen over the years. I look forward to your thoughts.
Adam J. Fein Reply November 19, 2010 at 8:14 am

FYI, these data come from a 2005 (!) study by the FDA.

See http://www.fda.gov/AboutFDA/CentersOffices/CDER/ucm129385.htm

While I suspect the curve may be even steeper now, there has also been substantial consolidation among manufacturers. I’m curious to see some more recent numbers.

Adam