Researcher Says Govt. Price Negotiation Saves More Than Generics

2 min
December 09, 2021

By John Wilkerson

December 9, 2021

The Medicare negotiating provisions of the Build Back Better Act would lower drug spending more than the current generic competition system, according to calculations by West Health Director of Health Policy Sean Dickson.

Dickson said his back-of-the-envelope math counters drug industry arguments that Medicare price negotiation legislation would have the unintended consequence of raising costs for Medicare-negotiated drugs by undermining generic competition for those drugs.

Makers of biosimilars and generic drugs say that, due to the timeline for Medicare negotiation, Democrats’ legislation would substitute government price setting on 10 to 20 drugs for generic competition. The legislation would direct Medicare to negotiate prices after biopharmaceuticals have been on the market for 13 years and after drugs have been on the market nine years. The bill would apply to 10 products at first and eventually apply to 20 products.

Makers of biosimilars and generics are proposing changes to the bill. One approach would exclude products from government negotiated prices in advance of biosimilar and generic competition so prices on brands could go back up to reward biosimilar and generic competition. It’s unclear whether that proposal is gaining traction.

To reward early generic competition, current law gives the first generic six months on the market without competition from other generics, so during that time they charge almost as much as brands, then the price drops significantly when additional generics enter the market.

Dickson said even if no generic to a negotiated drug were to enter the market, savings from drug pricing legislation would be greater than savings from generic competition during the first 19 years after generics typically enter the market. Dickson’s math assumes that generic competition would start 14 years after brand drug approval, which is in line with studies on the timing of generic competition.

Also, generics would still almost surely compete at some point during that 19-year period, Dickson said.

Additionally, the bill would lower prices before generic competition typically starts, and those initial savings would be greater than savings from generic competition after the 19-year period, he said.

“We wouldn’t see any cumulative savings from generic competition until 2054,” Dickson said on Twitter.


Sean Dickson
Director, Health Policy