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Market Concentration and Its Implications for Generic Drug Prices

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  • Atanu Saha
  • Yong Xu

Abstract

While many prior studies have focused on brand-generic drug price differences, we contribute to the literature by examining the competitive landscape and pricing within the generic pharmaceutical industry. We have analyzed the possible effects of rising levels of market concentration in this industry. Our results have shown that high levels of market concentration are associated with declining price discounts, which we define as the percent difference between WAC (list price) and NADAC (a proxy for price net of discounts). Using 500 top selling generic drugs’ prices at retail pharmacies, we demonstrate that while in the least concentrated markets the prices of the generic drugs have registered on average a year-over-year decline, in the most concentrated markets the opposite is true: the prices of generics have risen. These results exist even after controlling for drug-specific characteristics such as market size and therapeutic class. We estimate that the high degree of concentration in the generic industry is costing payers on average more than a billion dollars per month.

Suggested Citation

  • Atanu Saha & Yong Xu, 2025. "Market Concentration and Its Implications for Generic Drug Prices," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 32(2), pages 139-155, May.
    • Handle: RePEc:taf:ijecbs:v:32:y:2025:i:2:p:139-155
    DOI: 10.1080/13571516.2025.2456136
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