The prices of generic drugs are declining as more of them are becoming available on the market along with pressure from major retail pharmacies like Walmart (WMT - Get Report) who are large purchasers of these medications.
While consumers are benefiting from the lower costs as other health care costs have skyrocketed, drugmakers and companies affiliated with the supply are facing a challenging environment. As the Food and Drug Administration has approved more generic versions of drugs, price declines and a declining volume have all contributed to a dip in revenue for Teva Pharmaceutical Industries Ltd. (TEVA - Get Report) . The Israeli-based generic drugmaker was hit hard after reporting its earnings that did not meet expectations and shareholders punished the company as the stock dropped by 17.8% on Aug. 3 and by 9.6% during Friday morning.
Teva's competitors also suffered on August 3 - Perrigo Co. (PRGO - Get Report) and Mylan (MYL - Get Report) also saw declines as well the VanEck Vectors Generic Drugs ETF (GNRX) . The shares of drug distributors also dipped, citing headwinds in the generic market. Shares of AmerisourceBergen Corp. (ABC - Get Report) and Cardinal Health (CAH - Get Report) also declined.
Consumers faced paying more money for prescription drugs in 2014 due to the spike in drug prices, even among generic drugs as fewer patents expired, but the surge tapered off in 2015.
Although generic drugs overall have become less expensive, consumers are still spending a large portion of their income on them, according to a May report by Rabah Kamal and Cynthia Cox of the Kaiser Family Foundation, a Menlo Park, Calif.-based non-profit organization focusing on national health issues.
"Prescription drugs had represented a shrinking share of total health spending through 2013, but drug spending has since increased and is expected to continue to grow over the next several years," the report said.
The costs of medication still remain a burden for many Americans, with about one in four who face difficulties paying for them, especially for patients taking specialty drugs to treat chronic or rare conditions such as cancer and Hepatitis C. The out-of-pocket costs for prescription drugs are expected to increase, but will likely "represent a smaller portion of overall Rx spending," the authors said.
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The Kaiser report said that during 2008 to 2016, generic prices declined, but branded drug prices nearly doubled in price. However, consolidation in the generic drug manufacturing industry or short-time shortages of active ingredients used to produce the drug contributed to some increases, according to data from Express Scripts.
How Consumers Can Save Money
Pharmacies offer different prices based on the services they provide such as being open 24 hours a day. Bypassing national chains in favor of an independent community pharmacy or compounding one pharmacies often yield more savings. Local pharmacists can also recommend alternative medications or inform patients of manufacturer coupons and discounts.
If your doctor prescribed a new medication for you, check your insurance plan to determine what type of coverage it provides for that drug, said Nate Purpura, vice president of consumer affairs eHealth.com, an online health insurance exchange based in Mountain View, Calif.
Plans with a lower deductible can often save money since the coverage for prescription drugs could be expansive and the out of pocket expenses could be lower.
Even if patients stick with the same health insurance plan from last year, checking the out-of-pocket costs is important since it can vary from year to year, he said.
Cheaper options can be found through pharmacy networks such as Blink Health which are able to negotiate prices for various drugs or online companies like GoodRx which track prices.
"Shopping wisely can also yield big savings," said Rachael Norman, founder of GetBetter, an Oakland, Calif.-based company which helps consumers file out-of-network health insurance claims. "Costco pharmacies are often a low-cost place to purchase medications. There are also a variety of programs available, such as Partnership for Prescription Assistance that can help patients with insufficient prescription drug coverage get low-cost or no-cost medication."
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