Generic Product Price Bounces and How they Happen

Sep 7, 2022 | Generics

After the originator product loses its exclusivity (LOE) and generics have been launched, the market price of the generic can fall very quickly. Those products with more generic licence holders tend to fall faster than those with fewer. However, where product prices fall very rapidly, licence holders can see the market rate fall below a point at which they can make a profit. At this point the remaining stock in the market becomes more valuable as the amount available to supply pharmacies declines.

After having seen prices decline to very low levels, some licence holders may choose not to make any more. This normally means closing production in their own manufacturing sites, or telling their contract manufacturers that they will not be repeating the order. Those companies which have already ordered more stock gradually release it into the market, resulting in falling prices.  However, when that stock has been used, the failure of some license holders to reorder means availability becomes a problem again and prices rise.

This pattern can repeat itself, though with decreasing intensity, for some considerable time. Gabapentin Caps were launched after patent expiry in Dec 2003, and prices have bounced four times since then, or roughly every 40 months. If the pattern repeats again, prices should rise to another peak soon.

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