Generic drugs are cheaper than the brand-name alternatives, everyone knows that.
But the truth turns out to be more complicated.
A new analysis, from the drug price-comparison platform GoodRx, is shining a light on an open secret in health care, that the prices of brand drugs often skyrocket right before new competition is expected.
New generic drugs are still more inexpensive than the brand product — at that particular moment in time.
But because of the increases made on branded products, new generic rivals are sometimes priced at the same level that the brand was several months or a year earlier, the report found.
“What was striking for us was how visible those price spikes were in the months right before the generic comes out,” Thomas Goetz, the chief of research at GoodRx, told MarketWatch. “In essence, the system is not getting the benefit of a discounted price, as seen a few months before.”
Take Nitrostat, a heart medication made by Pfizer PFE, +0.64% The drug’s price had been increasing for years, but there was a major jump of about 56% in 2015, the year before a generic version came on the market, according to the report.
Mapped out, the prices make for a startling graph.
(Pfizer referred MarketWatch to a statement about drug prices made by Chief Executive Ian Read earlier this month, in which he said Pfizer is committed to providing affordable access to medications. The full statement can be found here.)
GoodRx used a small sample for the study, focusing on the 12 most prominent drugs that lost patent protection in the last four years. For price, the research team used a measure called “usual and customary price,” or the cash price a patient could pay at the pharmacy.
The benchmark isn’t a perfect one,