The effects of competition on prescription-drug-product substitution

Almost all states have enacted legislation, that allows pharmacists to substitute drug products when filling prescriptions. We studied the effects of competition in the drugstore service area on the use of less costly drug products and the pricing of prescriptions under the drug-product-selection law in Minnesota. In 38 drugstores in the Minneapolis-St. Paul area, rates of substitution of generic or less-costly brands and prescription prices were analyzed according to the degree of competition in the drugstore's service area, as measured by the pharmacists' perceptions and the number of competing drugstores within a 1-mile radius. Although higher levels of competition were associated with increased use of generic drugs for prescriptions written generically, competition did not appear to affect either dispensing patterns for prescriptions written for brand-name products or the retail prices of brand-name or generic products. These findings do not support the hypothesis that competition reduces prescription-drug prices through improved selection of drug products at the retail pharmacy level.