COMPETITION TRIGGERS PRICE CUTS, FDA FINDS

Fresh evidence of the power of generic drugs toreduce US health costs surfaced as part of a newFDA study that documents the sharp declines inprescription drug prices following the onset ofgeneric competition. According to the analysis,much of the downward pressure on Rx price levelsoccurs after 2 generic versions reach the market.

When a brand name drug faces only one genericcompetitor, the discount associated with that singlegeneric averages only 6% of the branded drug'sprice. The FDA, however, found that as additionalgenerics reach the market, prices begin to fall dramatically.When a second generic manufacturerlaunches its product, the average per-dose price forthe generic medication falls to 52% of the brandname version's cost.

Prices continue to decline as more generic competitorsenter the market. According to the FDAanalysis, when 9 generic versions become available,these products sell for an average of just 20%of the price of the brand name product. The FDA'sanalysis was based on 1999-2004 retail sales dataon single-ingredient drug products collected by IMSHealth Inc.