The Price to Consumers of Generic Pharmaceuticals: Beyond the Headlines

Generic drug prices have received a great deal of attention in the past few years. Many agencies have conducted investigations into the pricing patterns for generic drugs. Price spikes for several specific generic drugs have also been widely reported in the media. Today, 90% of all retail prescriptions sold in the United States are generic drugs. Thus, these prices affect affordability of prescription drugs. We construct two Laspeyres chained price indexes for generic prescription drugs. The first reflects direct out-of-pocket payments by consumers to pharmacies for dispensing generic prescription drugs. The second measures the total price received by the pharmacy (the direct out-of-pocket payment plus the price paid to the pharmacy by the insurer). The chained direct out-of-pocket consumer price index we construct shows a roughly 50% decline for generic prescription drugs between 2007 and 2016. The total consumer price index for generic prescription drugs fell by nearly 80%.