Market influences on generic drug utilization: 1993 to 2001

Outpatient prescription drugs accounted for about 11% of U.S. health care expenditures in 2003 and have been growing at a disproportionately high rate. In most settings, the single most effective way to hold down drug expenditures is appropriate use of generics. This research addressed a few shortcomings in the peer-reviewed literature on generic drug utilization as follows: (1) more recent data were utilized, (2) generic penetration at two market levels was evaluated (e.g., the substitutable drug product presentation level and the broader chemical entity level where the effect of line extensions is implicit), (3) the effect of the presence of pseudogenerics (generics introduced by originator companies) on generic penetration was assessed, and (4) generic penetration was evaluated in ten channels of distribution.; Random effects, two-stage least squares modeling was applied to data on monthly generic unit market shares of all chemical entities with first generic entry between 1993 and 2001. This study focused on oral solid dosage forms and included 66 chemical entities at the chemical entity level, and 198 drug product presentations at the substitutable level. The results indicated that at the substitutable level, generic share was positively influenced by the originator to generic price ratio, market size prior to generic entry, an increase in time since generic entry, and generic introduction in more recent years; and negatively for over-the-counter status. Furthermore, nearly 50% of drug product presentations analyzed had presence of pseudo-generics and there was some evidence that presence of pseudo-generics was associated with lower generic market shares. Patterns of generic penetration varied across channels of distribution, with federal facilities and hospitals having slower and lower rates of generic penetration than the retail channels. Lastly, the generic penetration rate at the chemical entity level was lower than the rate at the substitutable level (61% vs. 77%) three years after first generic entry mostly due to the introduction of line extensions by originator companies. More than one-fourth of chemical entities had line extensions introduced within three years of first generic entry, and the presence of certain types of line extensions was found to significantly lower the generic penetration rate.