The generic price spikes of 2013 to 2015

In November 2013, retail pharmacies paid an average of 10.6 cents for a 125 mcg digoxin tablet, a decades-old heart drug. A month later the figure was 91 cents. By March 2014 it was $1.09, a rise of 924 percent, according to GxRadar's analysis of the federal government's NADAC pharmacy cost survey⁴. Nothing about the tablet had changed.

Digoxin was not alone. In the early 2010s, while the overall cost of generics in Medicare kept falling, a sizable group of older, well-established generics doubled, tripled or climbed much further in a single year. A federal audit later counted 315 of them.

Those spikes reshaped the debate over generic drugs. They prompted a GAO study, an HHS inspector general audit, a change to Medicaid's rebate law, a multistate antitrust case and a new FDA pathway for drugs with few makers. The conditions behind them, thin competition above all, have not gone away.

What GAO found in Medicare Part D

In August 2016 the Government Accountability Office published GAO-16-706¹, a study of generic prices in Medicare Part D from the first quarter of 2010 through the second quarter of 2015. It tracked two groups. A changing basket of 2,378 generics, including new launches, fell 59 percent in price over the period, helped by the steep drops that follow new generic entry. A fixed basket of 1,441 established generics, on the market the whole time, fell 22 percent through late 2012, then rose 10 percent through mid-2015, for a net decline of 14 percent.

Within the second group, GAO looked for what it called extraordinary price increases, a rise of 100 percent or more within one year. It found 315 drugs, slightly more than one in five established generics, with at least one such increase. Those drugs had 351 separate increases involving 157 active ingredients, and the count rose sharply in the later years of the study.

Most increases sat at the low end of that range; 183 of the 351 were below 200 percent. But 48 were 500 percent or higher, and 15 were 1,000 percent or higher, the full report² shows. The increases also stuck. Of the 248 that GAO could follow for at least another year, nearly all stayed at least 100 percent above the starting price, and 184 stayed level or went higher. Without the 315 drugs, GAO calculated, prices in the established basket would have fallen about 39 percent instead of 14 percent.

Molecules GAO named, and what CMS data show

GAO listed all 315 drugs in an appendix and singled out a few in the body of the report. Clomipramine 50 mg capsules rose more than 2,000 percent in one year, from $0.34 to $8.43 per capsule between early 2013 and early 2014, based on GAO's average Part D unit prices. Erythromycin tablets had three separate extraordinary increases, going from $0.24 to $8.96 per tablet over the period. The report also discussed hydrocortisone, piroxicam and methazolamide.

NADAC, the weekly survey of what pharmacies pay on the invoice, began in late 2013 and catches the same pattern from another angle. Of the 47 common generics GxRadar tracks on its price pages, five at least doubled in spikes that began between December 2013 and late 2015.

Monthly values are from GxRadar's analysis of CMS NADAC files through October 2026. All five came down from their peaks, but only tamsulosin fell below where it started; the other four still cost more per unit in October 2026 than before their jumps. Allopurinol, trazodone and warfarin are also among the generics that cost more than in January 2014. The doxycycline hyclate 100 mg capsule shows the tail end of an earlier episode: its NADAC series opens in November 2013 at $3.36 per capsule and falls to 63 cents by December 2016 and 11 cents by October 2026, as covered on the doxycycline page and in our account of doxycycline's spike and fall.

Causes cited

Manufacturers told GAO that competition was the main driver of generic prices, and other stakeholders agreed. The report² lists the forces they said could thin competition out. When only one or two companies make a drug, the price declines that come with competition can reverse, and exits, mergers or a plant shutdown can shrink a market quickly. Stakeholders pointed to consolidation among suppliers and among buyers; to limited access to active ingredients and production difficulties, especially for sterile products; to small patient populations that give new makers little reason to enter; and to a backlog of generic applications at FDA that delayed entrants who might have pushed prices back down (the backlog GDUFA was created to clear, as GxRadar's GDUFA explainer describes).

FDA's own economists later quantified the competition effect. In a December 2019 analysis¹⁰, they found that generic prices with a single generic maker were 39 percent below the brand's pre-entry price using manufacturer price data, and more than 95 percent below with six or more makers. GxRadar's piece on why generic prices fall as competitors enter runs through that research.

Medicaid's missing inflation penalty

In December 2015 the HHS Office of Inspector General reported³ that average manufacturer prices for generics rose faster than the statutory inflation factor in 22 percent of the quarterly prices it reviewed. At the time, Medicaid charged brand manufacturers an extra rebate when prices outpaced inflation but had no such penalty for generics. OIG estimated that if one had applied, Medicaid would have collected about $1.4 billion more in rebates on the top 200 generics from 2005 through 2014, with the annual figure growing from more than $39 million in 2005 to more than $464 million in 2014.

Congress had already acted. Section 602 of the Bipartisan Budget Act of 2015⁵, signed November 2, 2015, applied the Medicaid additional rebate to generic drugs, using 2014 prices as the baseline, for rebate periods beginning one year after enactment. CMS told manufacturers in Release No. 97⁶ that the change took effect with the first quarter of 2017. GxRadar's piece on Medicaid and generic drug prices covers how those rebates work.

The antitrust case and a new FDA pathway

In December 2016, a group of states filed a federal antitrust lawsuit against generic manufacturers, the Ohio attorney general announced⁷. Later complaints by state attorneys general widened the case. These are allegations made in civil litigation.

Congress and FDA also moved to speed entry into thin markets. The FDA Reauthorization Act of 2017⁸, signed August 18, 2017, created the competitive generic therapy pathway. A drug qualifies, under FDA's guidance⁹, when there is not more than one approved product in the active section of the Orange Book, and the first approved applicant can earn 180 days of exclusivity. GxRadar's article on competitive generic therapy shows 531 such approvals through October 2026.

GAO and FDA have both linked limited competition to price increases and to shortage risk (see why drug shortages happen). NADAC prices for the 47 drugs GxRadar follows update each week.