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The Regulation of Prescription Drug Competition and Market Responses

The Regulation of Prescription Drug Competition and Market Responses

Patterns in Prices and Sales following Loss of Exclusivity

(p.243) 8 The Regulation of Prescription Drug Competition and Market Responses
Measuring and Modeling Health Care Costs
Murray L. AitkenErnst R. BerndtBarry BosworthIain M. CockburnRichard FrankMichael KleinrockBradley T. Shapiro
University of Chicago Press

We examine six molecules facing initial loss of US exclusivity (LOE) between June 2009 and May 2013 that were among the 50 most prescribed molecules in May 2013. We examine prices per day of therapy (average revenue received by retail pharmacy per day of therapy) and utilization separately for four payer types (cash, Medicare Part D, Medicaid, and other third party payer, TPP) and age under versus 65 and older. We find quantity substitutions away from the brand are larger proportionately and more rapid than average price reductions during the first six months following initial LOE. Brands raise prices after generics enter. Expansion of total molecule sales (brand plus generic) following LOE is increasingly common compared with earlier eras. The number of days of therapy in a prescription has increased over time. Generic penetration rates are highest and fastest for TPPs, and lowest and slowest for Medicaid. Cash customers and seniors pay the highest prices for brands and generics, third party payers and those under 65 pay the lowest prices, with Medicaid and Medicare Part D in between. The presence of an authorized generic during the exclusivity period affects prices and volumes of prescriptions, but this varies across molecules.

Keywords:   patent exclusivity, third party payer, Medicare Part D, Medicaid, generic penetration rate, authorized generic

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