Generic Drugs Getting Cheaper

Finally, a little good health care news for consumers: U.S. prices for generic prescription drugs, which already cost as little as one-third what their brand-name cousins do, have been getting cheaper and likely will keep doing so.

The causes? The ultra-low prices for generic prescriptions offered by giant retailers and drugstore chains and intense competition among the many generic drugmakers fighting for sales, according to health information firm IMS Health.

Those pricing pressures forced down dollar sales of generic drugs in the U.S. by 2.7 percent in the year ending in September, even though the number of generic prescriptions filled actually increased by 5.4 percent over the year before, IMS reported Wednesday.

"We're seeing the combination of pressure from large retailers to make generics available at ever-lower prices for their customers" and the intensified competition among generic drugmakers leading them to cut prices, said Murray Aitken, senior vice president of the Healthcare Insight unit at IMS.

Aitken said the price competition is particularly intense for drugs that had been brand-name blockbusters - recent examples include osteoporosis drug Fosamax and cholesterol fighter Zocor - where "there can be as many as 20 generic manufacturers competing for share."

Meanwhile, in 2006 discounter Kmart, followed by Wal-Mart Stores Inc. and Target Corp., began offering a large number of popular generic drugs for just $4 or $5 per month, passing on their savings from buying in large volume as a strategy to draw more shoppers into their stores.

Some other major retailers with in-store pharmacies and even drugstore chains have followed suit with similar programs, with some now offering generic drugs for as little as $10 for a three-month supply.

"I think we'll continue to see very intense levels of competition" in the U.S., Aitken said. "It's a very good story for the health care system."

And more popular generics will be coming soon.

Between now and 2012, brand-name drugs with $139 billion in annual sales in the world's top eight markets will face generic competition, IMS noted. Those drugs include the world's top-selling medicine, Pfizer Inc.'s cholesterol drug Lipitor, which has sales of nearly $13 billion a year.

However, after that, the ongoing decline in the number of major new brand-name drugs being approved will mean fewer new generics.

Generics generated $78 billion in revenue in the 26 countries with the highest sales in the year ending in September, an increase of only 3.6 percent over the prior year, according to IMS. The $70 billion total does not include sales at Wal-Mart, which does not disclose such data. Revenue had been climbing by double digits for several years and jumped 11.4 percent in 2007.

The report noted U.S. generic sales dipped from $34 billion in 2007 to $33 billion in the year ending in September, when generic drugs accounted for nearly 64 percent of all prescriptions filled.

Among other major markets, revenue from generic drugs also declined in the U.K., driven by pricing pressure from its national health system, but increased by double digits in France, Italy, Japan and Spain.

IMS expects what Aitken called "seismic change" in the global generics industry over the next decade, as the pricing pressures lead to more small generic manufacturers whose profit margins are being squeezed now being acquired by the dominant players. Meanwhile, more of those big companies are branching out into developing brand-name drugs, more brand-name companies trying to compensate for slow growth are making their own generics, and generic versions of biotech drugs - not yet allowed in this country - are expected to become more common, expanding the generic market