While generic drugs have long been considered a cost-effective alternative to brand-name medications, new research highlights a troubling trend: increasing market concentration within the generic pharmaceutical industry is leading to higher prices. Traditionally, competition among generic manufacturers has driven prices down, but as fewer companies dominate the market, the expected price discounts are shrinking.

An analysis of the 500 top-selling generic drugs at retail pharmacies reveals a stark contrast: in the least concentrated markets, generic drug prices have continued to decline year over year, but in the most concentrated markets, prices are rising instead. This pattern persists even after accounting for factors such as market size and therapeutic class. The financial impact is substantial, with the high degree of consolidation in the industry estimated to cost payers more than a billion dollars per month.

As the generic pharmaceutical landscape continues to evolve, these findings underscore the need for closer scrutiny of market dynamics and potential regulatory responses to ensure that generics fulfill their promise of affordability.

Read the full article in the International Journal of the Economics of Business.

If you have any questions or would like to discuss these topics please reach out to Atanu Saha or Yong Xu.

To receive StoneTurn Insights, sign up for our newsletter.