Although net prices of brand-name drugs have increased significantly over the last decade, the savings produced by generics have actually driven average prescription prices down in Medicare's pharmacy benefit and Medicaid, according to a new analysis by the Congressional Budget Office.
Why it matters: The analysis reiterates that the generic market is largely working as intended.
By the numbers: The average net price of a prescription fell from $57 in 2009 to $50 in 2018 in Medicare Part D, and from $63 to $48 in Medicaid.
- The drop is largely attributable to the growing use of generics, which jumped from 75% to 90% of all prescriptions nationally during that time frame. The average price for a generic prescription also fell in both programs.
- But the average net brand-name prescription price more than doubled in Part D and increased by 50% in Medicaid, per the analysis. These increases were driven by higher launch prices for new drugs and price increases of drugs already on the market.
- Higher launch prices are due in part to more specialty drugs entering the market.
Yes, but: The analysis focused on drugs sold in pharmacies, not drugs administered in hospitals or doctors' offices — which tend to be more expensive and have different market dynamics.
- And the analysis notes that the share of total prescriptions that are generic may not continue to grow in the same way in the future, partially "because newer brand-name drugs tend to be more costly to manufacture and may be more challenging to replicate as generic drugs."
The big picture: Democrats' legislative agenda — including the party's push to lower prescription drug prices — has stalled in the Senate.
- But the provisions allowing Medicare to negotiate drug prices would apply only to insulin and certain drugs without competition, which would largely exclude the generic market.
The bottom line: "One reasonable interpretation of these data is that we have a targeted drug price problem, not a general one," said the American Enterprise Institute's Ben Ippolito.
